Binkowski, Karol; He, Peilun; Kordzakhia, Nino; … - 2021
The two unobservable state variables representing the short and long term factors introduced by Schwartz and Smith in [16] for risk-neutral pricing of futures contracts are modelled as two correlated Ornstein-Uhlenbeck processes. The Kalman Filter (KF) method has been implemented to estimate the...