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Hedging the Counterparty Credit Risk of an Oil Company with Oil Futures Using Dynamic GARCH – A Derivative's Approach to Right-Way Risk
Lehrbass, Frank - 2014
If the creditworthiness of a counterparty is a derivative of a commodity price, there is the potential to have right … identification of "Right Way Risk" (RWR). This approach only works if the stock and commodity price are co-integrated. To set the … picture of credit risk and to structure commodity transactions more rewardingly …
Persistent link: https://www.econbiz.de/10013061102
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Dynamic jump intensities and risk premiums in crude oil futures and options markets
Christoffersen, Peter F.; Jacobs, Kris; Li, Bingxin - 2016
Options on crude oil futures are the most actively traded commodity options. We develop a class of computationally efficient discrete-time jump models that allow for closed-form option valuation, and we use crude oil futures and options data to investigate the economic importance of jumps and...
Persistent link: https://www.econbiz.de/10011646275
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Commodity Option Implied Volatilities and the Expected Futures Returns
Gao, Lin - 2019
The detrended implied volatility of commodity options (VOL) forecasts the cross section of the commodity futures returns significantly. A zero-cost strategy that is long in low VOL and short in high VOL commodities yields an annualized return of 12.66% and a Sharpe ratio of 0.69. Notably, the...
Persistent link: https://www.econbiz.de/10014122276
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Analogy Based Valuation of Commodity Options
Siddiqi, Hammad - 2015
Typically, three types of implied volatility smiles are seen in commodity options: the reverse skew, the smile, and the forward skew. I put forward an economic explanation for all three types of implied volatility smiles based on the idea that a commodity call option is valued in analogy with...
Persistent link: https://www.econbiz.de/10013031127
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Hedging Pressure and Commodity Option Prices
Cheng, Ing-Haw; Tang, Ke; Yan, Lei - 2021
A new measure of hedging pressure in commodity options markets—commercial hedgers’ net short option exposure—predicts option returns and changes in the slope of implied volatility curves. Puts are more expensive, and calls are cheaper, when values of option hedging pressure are greater....
Persistent link: https://www.econbiz.de/10013211279
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Pricing of Forwards and Other Derivatives in Cointegrated Commodity Markets
Benth, Fred Espen - 2014
We analyse cointegration in commodity markets, and propose a parametric class of pricing measures which preserves cointegration for forward prices with fixed time to maturity. We present explicit expressions for the term structure of volatility and correlation in the context of our spot price...
Persistent link: https://www.econbiz.de/10013044930
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Pricing of Derivatives on Commodity Indices
Rauch, Johannes - 2014
This paper introduces a novel method for pricing commodity index derivatives consistently with market prices of derivatives on single commodities. We discuss the Black, mean-reversion and local volatility pricing models with special attention paid to the parameterization of volatility surfaces....
Persistent link: https://www.econbiz.de/10013065589
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Dynamic Jump Intensities and Risk Premiums in Crude Oil Futures and Options Markets
Christoffersen, Peter F. - 2020
Options on crude oil futures are the most actively traded commodity options. We develop a class of computationally efficient discrete-time jump models that allow for closed-form option valuation, and we use crude oil futures and options data to investigate the economic importance of jumps and...
Persistent link: https://www.econbiz.de/10012850215
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Managing revenue risk of the firm : commodity futures and options
Broll, Udo; Kit, Pong Wong - In: IMA journal of management mathematics 28 (2017) 2, pp. 245-258
Persistent link: https://www.econbiz.de/10011723267
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Performance Persistence and the Implied Volatility Smile of the Commodity Options Contracts. We Examine Hedge Funds Contracts of Wheat, Corn, Live Cattle, Soybean Oil, and Lean Hog
Guirguis, Michel - 2023
. We examine contracts of wheat, corn, live cattle, soybean oil, and lean hog. Hedge funds use options and futures in terms … of commodities to hedge market risk. We compare the long and short - run performance returns after fees deduction. The … exchange, CME, derivative market. The sample that we use is from the period 2010 to 2020. We show the existence of the implied …
Persistent link: https://www.econbiz.de/10014355868