A new technique to estimate the risk-neutral processes in jump-diffusion commodity futures models

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS

卷:309

Article; Proceedings Paper

Gomez-Valle, L.¹  Habibilashkary, Z.¹  Martinez-Rodriguez, J.¹ 

[1] Univ Valladolid, Fac Ciencias Econ & Empresariales, Dept Econ Aplicada, Ave Valle Esgueva 6, E-47011 Valladolid, Spain

关键词: Commodity futures;    Jump diffusion stochastic processes;    Risk-neutral measure;    Numerical differentiation;    Nonparametric estimation;   

DOI  :  10.1016/j.cam.2015.12.028

来源: Elsevier

【 摘 要 】

In order to price commodity derivatives, it is necessary to estimate the market prices of risk as well as the functions of the stochastic processes of the factors in the model. However, the estimation of the market prices of risk is an open question in the jump-diffusion derivative literature when a closed-form solution is not known. In this paper, we propose a novel approach for estimating the functions of the risk-neutral processes directly from market data. Moreover, this new approach avoids the estimation of the physical drift as well as the market prices of risk in order to price commodity futures. More precisely, we obtain some results that relate the risk-neutral drifts, volatilities and parameters of the jump amplitude distributions with market data. Finally, we examine the accuracy of the proposed method with NYMEX (New York Mercantile Exchange) data and we show the benefits of using jump processes for modelling the commodity price dynamics in commodity futures models. (C) 2016 Elsevier B.V. All rights reserved.

【 授权许可】

Free