The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices
Joint Authors
Gómez-Valle, L.
Martínez-Rodríguez, J.
Habibilashkary, Z.
Source
Issue
Vol. 2017, Issue 2017 (31 Dec. 2017), pp.1-10, 10 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2017-10-18
Country of Publication
Egypt
No. of Pages
10
Main Subjects
Abstract EN
In this paper, we analyze the role of the jump size distribution in the US natural gas prices when valuing natural gas futures traded at New York Mercantile Exchange (NYMEX) and we observe that a jump-diffusion model always provides lower errors than a diffusion model.
Moreover, we also show that although the Normal distribution offers lower errors for short maturities, the Exponential distribution is quite accurate for long maturities.
We also price natural gas options and we see that, in general, the model with the Normal jump size distribution underprices these options with respect to the Exponential distribution.
Finally, we obtain the futures risk premia in both cases and we observe that for long maturities the term structure of the risk premia is negative.
Moreover, the Exponential distribution provides the highest premia in absolute value.
American Psychological Association (APA)
Gómez-Valle, L.& Habibilashkary, Z.& Martínez-Rodríguez, J.. 2017. The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices. Abstract and Applied Analysis،Vol. 2017, no. 2017, pp.1-10.
https://search.emarefa.net/detail/BIM-1120800
Modern Language Association (MLA)
Gómez-Valle, L.…[et al.]. The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices. Abstract and Applied Analysis No. 2017 (2017), pp.1-10.
https://search.emarefa.net/detail/BIM-1120800
American Medical Association (AMA)
Gómez-Valle, L.& Habibilashkary, Z.& Martínez-Rodríguez, J.. The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices. Abstract and Applied Analysis. 2017. Vol. 2017, no. 2017, pp.1-10.
https://search.emarefa.net/detail/BIM-1120800
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1120800