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,...

Many commodity markets contain a strong seasonal component in volatility. In this paper, the importance of this seasonal behavior for the pricing of commodity options is analyzed. We propose a stochastic volatility model where the drift term of the variance process captures the observed seasonal...

In this paper we investigate the claim that hedge funds offer investors a superior risk-return trade-off. We do so using a continuous time version of Dybvig’s (1988a, 1988b) payoff distribution pricing model. The evaluation model, which does not require any assumptions with regard to the...