Working Papers,
Copenhagen Business School, Department of Finance

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

JEL-codes: C00; G13

47 pages, June 1, 2002

Full text files

7179  

Download statistics

• Copenhagen Business School, Department of Finance
• Ordering Working Papers
• Home page for this series

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 ().

RePEc:hhs:cbsfin:2002_004This page generated on 2024-09-13 22:19:15.