Many commodity markets contain a strong seasonal component not only at the price level, but also in volatility. In this paper, the importance of seasonal behavior in the volatility for the pricing of commodity options is analyzed. We propose a seasonally varying long-run mean variance process...

Price movements in many commodity markets exhibit significant seasonal patterns. In this paper, we study the effects of seasonal volatility on models' option pricing performance. In terms of options pricing, a deterministic seasonal component at the price level can be neglected. In contrast,...

This paper reviews extant research on commodity price dynamics and commodity derivatives pricing models. In the first half, we provide an overview of stylized facts of commodity price behavior that have been explored and documented in the theoretical and empirical literature. In the second half,...

In this paper we develop a continuous time factor model of commodity prices that allows for higher order autoregression and moving average components. The need for these components is documented by analyzing the convenience yield's time series dynamics. Making use of the affine model structure,...