IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v18y2015i02ns0219024915500107.html
   My bibliography  Save this article

Forward Prices As Functionals Of The Spot Path In Commodity Markets Modeled By Levy Semistationary Processes

Author

Listed:
  • FRED ESPEN BENTH

    (Department of Mathematics, University of Oslo, P.O. Box 1053, Blindern, N–0316 Oslo, Norway)

  • SARA ANA SOLANILLA BLANCO

    (Department of Mathematics, University of Oslo, P.O. Box 1053, Blindern, N–0316 Oslo, Norway)

Abstract

We show that the forward price can be represented as a functional of the spot price path in the case of Lévy semistationary (LSS) models for the spot dynamics. The functional is a weighted average of the historical spot price in general, and is derived by means of the Laplace transform. For the special cases of continuous-time autoregressive (CAR) moving average and Gamma-LSS processes for the spot dynamics, we are able to produce an analytical weight function. Both classes of processes are of interest in markets for power, weather and shipping, and we provide a discussion of the results based on numerical examples.

Suggested Citation

  • Fred Espen Benth & Sara Ana Solanilla Blanco, 2015. "Forward Prices As Functionals Of The Spot Path In Commodity Markets Modeled By Levy Semistationary Processes," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 1-35.
    • Handle: RePEc:wsi:ijtafx:v:18:y:2015:i:02:n:s0219024915500107
    DOI: 10.1142/S0219024915500107
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024915500107
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024915500107?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fred Espen Benth & Jūratė Šaltytė Benth, 2012. "Modeling and Pricing in Financial Markets for Weather Derivatives," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 8457, August.
    2. Amir H. Alizadeh & Nikos K. Nomikos, 2009. "Shipping Derivatives and Risk Management," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-23580-9, December.
    3. Fred Espen Benth & Jūratė Šaltytė Benth, 2012. "Financial markets for weather," World Scientific Book Chapters, in: Modeling and Pricing in Financial Markets for Weather Derivatives, chapter 1, pages 1-13, World Scientific Publishing Co. Pte. Ltd..
    4. Helyette Geman, 2005. "Commodities and Commodity Derivatives. Modeling and Pricing for Agriculturals, Metals and Energy," Post-Print halshs-00144182, HAL.
    5. repec:dau:papers:123456789/607 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benth, Fred Espen & Koekebakker, Steen, 2015. "Pricing of forwards and other derivatives in cointegrated commodity markets," Energy Economics, Elsevier, vol. 52(PA), pages 104-117.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fred Espen Benth & Marco Piccirilli & Tiziano Vargiolu, 2017. "Additive energy forward curves in a Heath-Jarrow-Morton framework," Papers 1709.03310, arXiv.org, revised Jun 2018.
    2. Fred Espen Benth & Asma Khedher & Michèle Vanmaele, 2020. "Pricing of Commodity Derivatives on Processes with Memory," Risks, MDPI, vol. 8(1), pages 1-32, January.
    3. Fred Espen Benth & Luca Di Persio & Silvia Lavagnini, 2018. "Stochastic Modeling of Wind Derivatives in Energy Markets," Risks, MDPI, vol. 6(2), pages 1-21, May.
    4. Wolfgang Karl Härdle & Brenda López Cabrera & Awdesch Melzer, 2021. "Pricing wind power futures," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 70(4), pages 1083-1102, August.
    5. Július Bemš & Caner Aydin, 2022. "Introduction to weather derivatives," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 11(3), May.
    6. Kononovicius, Aleksejus & Kazakevičius, Rytis & Kaulakys, Bronislovas, 2022. "Resemblance of the power-law scaling behavior of a non-Markovian and nonlinear point processes," Chaos, Solitons & Fractals, Elsevier, vol. 162(C).
    7. Aleksejus Kononovicius & Rytis Kazakeviv{c}ius & Bronislovas Kaulakys, 2022. "Resemblance of the power-law scaling behavior of a non-Markovian and nonlinear point processes," Papers 2205.07563, arXiv.org, revised Jul 2022.
    8. Fei Gao & Shuaiqiang Liu & Cornelis W. Oosterlee & Nico M. Temme, 2022. "Solution of integrals with fractional Brownian motion for different Hurst indices," Papers 2203.02323, arXiv.org, revised Mar 2022.
    9. Simona Franzoni & Cristian Pelizzari, 2021. "Rainfall option impact on profits of the hospitality industry through scenario correlation and copulas," Annals of Operations Research, Springer, vol. 299(1), pages 939-962, April.
    10. repec:hum:wpaper:sfb649dp2014-006 is not listed on IDEAS
    11. Groll, Andreas & López-Cabrera, Brenda & Meyer-Brandis, Thilo, 2016. "A consistent two-factor model for pricing temperature derivatives," Energy Economics, Elsevier, vol. 55(C), pages 112-126.
    12. Sonja Cox & Sven Karbach & Asma Khedher, 2022. "An infinite‐dimensional affine stochastic volatility model," Mathematical Finance, Wiley Blackwell, vol. 32(3), pages 878-906, July.
    13. Markus Hess, 2021. "A new approach to wind power futures pricing," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 1235-1252, December.
    14. Deschatre, Thomas & Féron, Olivier & Gruet, Pierre, 2021. "A survey of electricity spot and futures price models for risk management applications," Energy Economics, Elsevier, vol. 102(C).
    15. Johannes Kaufmann & Philipp Artur Kienscherf & Wolfgang Ketter, 2020. "Modeling and Managing Joint Price and Volumetric Risk for Volatile Electricity Portfolios," Energies, MDPI, vol. 13(14), pages 1-19, July.
    16. Yeny E. Rodríguez & Miguel A. Pérez-Uribe & Javier Contreras, 2021. "Wind Put Barrier Options Pricing Based on the Nordix Index," Energies, MDPI, vol. 14(4), pages 1-14, February.
    17. Fred Espen Benth & Asma Khedher & Mich`ele Vanmaele, 2017. "Pricing of commodity derivatives on processes with memory," Papers 1711.00307, arXiv.org.
    18. Goulas, Lambros & Skiadopoulos, George, 2012. "Are freight futures markets efficient? Evidence from IMAREX," International Journal of Forecasting, Elsevier, vol. 28(3), pages 644-659.
    19. Joanna Janczura & Aleksander Weron, 2008. "Modelling energy forward prices," HSC Research Reports HSC/08/03, Hugo Steinhaus Center, Wroclaw University of Technology.
    20. Bai, Yizhou & Xue, Cheng, 2021. "An empirical study on the regulated Chinese agricultural commodity futures market based on skew Ornstein-Uhlenbeck model," Research in International Business and Finance, Elsevier, vol. 57(C).
    21. Misund, Bård & Oglend, Atle, 2016. "Supply and demand determinants of natural gas price volatility in the U.K.: A vector autoregression approach," Energy, Elsevier, vol. 111(C), pages 178-189.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:18:y:2015:i:02:n:s0219024915500107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.