Publication: The Impact of Cointegration on Commodity Spread Options
The Impact of Cointegration on Commodity Spread Options
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Farkas, W., Gourier, E., Huitema, R., & Necula, C. (2016). The Impact of Cointegration on Commodity Spread Options. In K. Glau, Z. Grbac, M. Scherer, & R. Zagst (Eds.), Innovations in Derivatives Markets (No. 165; Issue 165, pp. 421–435). Springer. https://doi.org/10.1007/978-3-319-33446-2_20
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In this work we explore the implications of cointegration in a system of commodity prices on the premiums of options written on various spreads on the futures prices of these commodities. We employ a parsimonious, yet comprehensive model for cointegration in a system of commodity prices. The model has an exponential affine structure and is flexible enough to allow for an arbitrary number of cointegration relationships. We conduct an extensive simulation study on pricing spread options. We argue that cointegration creates an upward slo
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- Gourier, Elise
- Huitema, Robert
- Necula, Ciprian
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Farkas, W., Gourier, E., Huitema, R., & Necula, C. (2016). The Impact of Cointegration on Commodity Spread Options. In K. Glau, Z. Grbac, M. Scherer, & R. Zagst (Eds.), Innovations in Derivatives Markets (No. 165; Issue 165, pp. 421–435). Springer. https://doi.org/10.1007/978-3-319-33446-2_20
