Jin, Na; Lence, Sergio H.; Hart, Chad E.; Hayes, Dermot J. - Agricultural and Applied Economics Association - AAEA - 2010
this market failure is due to the absence of an accurate option pricing model for commodities where mean reversion can be … expected. Standard option pricing models assume proportionality between price variance and time to maturity. This … model suggests that traditional option pricing models will overprice long-term options on these markets. …