Working Paper Series, Department of Finance, Copenhagen Business School
No 2002-4:
Stochastic Volatility and Seasonality in Commodity Futures and Options: The Case of Soybeans
Martin Richter and Carsten Sørensen
Abstract: This paper sets up and estimates a continuous-time
stochastic volatility model using
panel data of soybean futures and
options in an integrated time-series study. The
model of commodity
price dynamics is within the class of affine asset pricing models,
and
option prices are determined using a standard inversion of characteristic
func-
tions approach. Our modeling acknowledges that commodities
exhibit seasonality
patterns in both spot price level and volatility.
The estimation method is based on a
state space formulation of the
model and a quasi maximum likelihood approach. Es-
timation results are
obtained based on weekly observations of soybean futures prices
and
options prices from the Chicago Board of Trade in the period October 1984
to
March 1999. The empirical results support the conceptual ideas in
the theory of
storage, but not the view that convenience yields behave
like timing options.
Keywords: Commodity derivatives; stochastic volatility; seasonality; integrated time-series estimation; (follow links to similar papers)
JEL-Codes: C00; G13; (follow links to similar papers)
47 pages, June 1, 2002
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Downloadable files:
7179 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Lars Nondal ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design Joakim Ekebom
