6533b7dcfe1ef96bd12729eb
RESEARCH PRODUCT
Cross-Commodity Spot Price Modeling with Stochastic Volatility and Leverage For Energy Markets
L. VosFred Espen Benthsubject
Statistics and Probability15A04Spot contractSABR volatility model01 natural sciences010104 statistics & probabilityEnergy marketVolatility swap0502 economics and businessEconometricsForward volatilityMean reversionstochastic volatilityleverage0101 mathematicsMathematics050208 financeStochastic volatilityApplied Mathematics05 social sciences91G60subordinator91G20Constant elasticity of variance modelVolatility smileOrnstein-Uhlenbeck process60H3060G1060G51description
Spot prices in energy markets exhibit special features, such as price spikes, mean reversion, stochastic volatility, inverse leverage effect, and dependencies between the commodities. In this paper a multivariate stochastic volatility model is introduced which captures these features. The second-order structure and stationarity of the model are analyzed in detail. A simulation method for Monte Carlo generation of price paths is introduced and a numerical example is presented.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2013-06-01 | Advances in Applied Probability |