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Mixture Distributions: Curing Commodity Kurtosis?

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  • Roberts, Matthew C.

Abstract

Recent research has determined that commodity prices often exhibit distributional characteristics inconsistent with normality or log-normality. We utilize discrete mixtures of log-normals in a GARCH framework to model corn, wheat, and soybean prices. Options premiums are simulated and compared to actual premiums and premiums generated under standard Black-Scholes assumptions.

Suggested Citation

  • Roberts, Matthew C., 1999. "Mixture Distributions: Curing Commodity Kurtosis?," 1999 Annual meeting, August 8-11, Nashville, TN 21604, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea99:21604
    DOI: 10.22004/ag.econ.21604
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    References listed on IDEAS

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    3. Ritchey, Robert J, 1990. "Call Option Valuation for Discrete Normal Mixtures," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 13(4), pages 285-296, Winter.
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    6. Fackler, Paul L., 1986. "Futures Price Volatility: Modeling Non-Constant Variance," 1986 Annual Meeting, July 27-30, Reno, Nevada 278172, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Robert J. Ritchey, 1990. "Call Option Valuation For Discrete Normal Mixtures," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 13(4), pages 285-296, December.
    8. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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