Search results for "Constant elasticity of variance model"

showing 3 items of 3 documents

Cross-Commodity Spot Price Modeling with Stochastic Volatility and Leverage For Energy Markets

2013

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.

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 process60H3060G1060G51Advances in Applied Probability
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THE STOCHASTIC VOLATILITY MODEL OF BARNDORFF-NIELSEN AND SHEPHARD IN COMMODITY MARKETS

2010

We consider the non-Gaussian stochastic volatility model of Barndorff-Nielsen and Shephard for the exponential mean-reversion model of Schwartz proposed for commodity spot prices. We analyze the properties of the stochastic dynamics, and show in particular that the log-spot prices possess a stationary distribution defined as a normal variance-mixture model. Furthermore, the stochastic volatility model allows for explicit forward prices, which may produce a hump structure inherited from the mean-reversion of the stochastic volatility. Although the spot price dynamics has continuous paths, the forward prices will have a jump dynamics, where jumps occur according to changes in the volatility p…

Economics and EconometricsStochastic volatilityApplied MathematicsImplied volatilityHeston modelConstant elasticity of variance modelAccountingVolatility swapForward volatilityVolatility smileEconomicsVolatility (finance)Mathematical economicsSocial Sciences (miscellaneous)FinanceMathematical Finance
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A Multivariate Non-Gaussian Stochastic Volatility Model with Leverage for Energy Markets

2009

Spot prices in energy markets exhibit special features like price spikes, mean-reversion inverse, stochastic volatility, inverse leverage effect and co-integration between the different commodities. In this paper a multivariate stochastic volatility model is introduced which captures these features. Second order structure and stationary issues of the model are analysed. Moreover the implied multivariate forward model is derived. Due to the flexibility of the model stylized facts of the forward curve as contango, backwardation and humps are explained. Moreover, a transformed-based method to price options on the forward is described, where fast and precise algorithms for price computations ca…

Stochastic volatilityConstant elasticity of variance modelNormal backwardationVolatility swapForward volatilityVolatility smileForward priceEconometricsEconomicsImplied volatilitySSRN Electronic Journal
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