In this paper, we study jumps in commodity prices. Unlike assumed in existing models of commodity price dynamics, a simple analysis of the data reveals that the probability of tail events is not constant but depends on the time of the year, i.e. exhibits seasonality. We propose a stochastic...

In this article, we consider the pricing and hedging of single‐route dry bulk freight futures contracts traded on the International Maritime Exchange. Thus far, this relatively young market has received almost no academic attention. In contrast to many other commodity markets, freight services...

This study analyzes the issue of American option valuation when the underlying exhibits a GARCH‐type volatility process. We propose the usage of Rubinstein's Edgeworth binomial tree (EBT) in contrast to simulation‐based methods being considered in previous studies. The EBT‐based valuation...

In this paper, we study the role of the volatility risk premium for the forecasting performance of implied volatility. We introduce a non-parametric and parsimonious approach to adjust the model-free implied volatility for the volatility risk premium and implement this methodology using more...

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

In recent years, Germany has significantly increased its share of electricity produced from renewable sources, which is mainly due to the Renewable Energy Act (EEG). The EEG substantially impacts the dynamics of intra-day electricity prices by increasing the likelihood of negative prices. In...

We study the empirical performance of the classical minimum-variance hedging strategy, comparing several econometric models for estimating hedge ratios of crude oil, gasoline and heating oil crack spreads. Given the great variability and large jumps in both spot and futures prices, considerable...

In this paper, we provide new evidence on the determinants of EU emission allowance prices by analyzing the most recent time period, i.e. phases III and IV. We consider energy (oil, natural gas, coal) and electricity prices as well as profit spreads of marginal power generation (clean dark...

Increasing interconnectivity between electricity wholesale markets requires an efficient allocation scheme in order to provide access to scarce cross-border transmission capacities. In both the US and Europe, existing schemes have primarily induced economically inefficient interconnector use...

This impressive Handbook presents the quantitative techniques that are commonly employed in empirical finance research together with real-world, state-of-the-art research examples.