Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives

By Anders B. Trolle, Eduardo S. Schwartz. 2009

349 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d2f5dc46a9ffcce2bd27f386e31299a6d171f084

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Citations in the corpus

The dynamics of commodity prices (2013, positive): “The possibility of stochastic volatility in commodities is considered by Geman and Nguyen (2005) for the soybean market, and by Trolle and Schwartz (2009) for crude oil.”
Modeling energy price dynamics: GARCH versus stochastic volatility (2016, background): “Alternatively, some recent papers have considered stochastic volatility models, where the volatility is a latent variable that follows a stochastic process (see, e.g., Sadorsky, 2005; Vo, 2009; Trolle and Schwartz, 2009; Larsson and Nossman, 2011; Brooks and Prokopczuk, 2013).”
Option Valuation with Observable Volatility and Jump Dynamics (2015, methodology): “Joint estimation is performed by following Trolle and Schwartz (2009) who assume that the vega-weighted option errors, ej, are i.i.d. Gaussian.”
Asymptotic Pricing of Commodity Derivatives using Stochastic Volatility Spot Models (2008, methodology): “Schwartz and Trolle ( 2008 ) are the first to introduce a second unspanned stochastic volatility component into the commodities framework using an HJM approach – previous work includes Cortazar and Schwartz ( 1994 ), Amin et al.”
The Shape and Term Structure of the Index Option Smirk: Why Multifactor Stochastic Volatility Models Work So Well (2009, neutral): “This approximation has also been used in Carr and Wu (2007) and Trolle and Schwartz (2008) among others.”
Modelling energy spot prices by volatility modulated Levy-driven Volterra processes (2013, background): “In addition, we will see that our new modelling framework encompasses many classical models such as those based on the Schwartz one-factor mean-reversion model, see Schwartz [62], and the wider class of continuous-time autoregressive moving-average (CARMA) processes.”
Valuation of Vix Derivatives (2013, positive): “Our procedure is analogous to the treatment of other stochastic volatility models, which are sometimes linearised to employ the Kalman filter (see e.g. Trolle and Schwartz, 2009).”
Correlation in Energy Markets (2017, methodology): “…σj2 √ υJt dW J t (I.9) dxjt = ( −γjxjt − ( αj γj + ρjWBσj1 ) υjt ) dt+ √ υjtdB j t (I.10) dφjt = ( −2γjφjt + αj γj υjt ) dt (I.11) European options on futures contracts can be priced according to: Proposition I.2 (Trolle and Schwartz (2009) Propositions 3 and 4) The price of an European put option…”
Bond Variance Risk Premia (2012, positive): “Bakshi and Kapadia (2003) and Vedolin (2010) for example study the variance risk premia of individual stocks and Trolle and Schwartz (2009) investigate variance risk premia in commodity markets.”