The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices
In this paper, we analyze the role of the jump size distribution in the US natural gas prices when valuing natural gas futures traded at New York Mercantile Exchange (NYMEX) and we observe that a jump-diffusion model always provides lower errors than a diffusion model. Moreover, we also show that al...
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| Language: | English |
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Wiley
2017-01-01
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| Series: | Abstract and Applied Analysis |
| Online Access: | http://dx.doi.org/10.1155/2017/3286549 |
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| author | L. Gómez-Valle Z. Habibilashkary J. Martínez-Rodríguez |
| author_facet | L. Gómez-Valle Z. Habibilashkary J. Martínez-Rodríguez |
| author_sort | L. Gómez-Valle |
| collection | DOAJ |
| description | In this paper, we analyze the role of the jump size distribution in the US natural gas prices when valuing natural gas futures traded at New York Mercantile Exchange (NYMEX) and we observe that a jump-diffusion model always provides lower errors than a diffusion model. Moreover, we also show that although the Normal distribution offers lower errors for short maturities, the Exponential distribution is quite accurate for long maturities. We also price natural gas options and we see that, in general, the model with the Normal jump size distribution underprices these options with respect to the Exponential distribution. Finally, we obtain the futures risk premia in both cases and we observe that for long maturities the term structure of the risk premia is negative. Moreover, the Exponential distribution provides the highest premia in absolute value. |
| format | Article |
| id | doaj-art-ab1d2000bcc14e92a8e7abc1b0b44d4d |
| institution | Kabale University |
| issn | 1085-3375 1687-0409 |
| language | English |
| publishDate | 2017-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Abstract and Applied Analysis |
| spelling | doaj-art-ab1d2000bcc14e92a8e7abc1b0b44d4d2025-02-03T05:54:38ZengWileyAbstract and Applied Analysis1085-33751687-04092017-01-01201710.1155/2017/32865493286549The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option PricesL. Gómez-Valle0Z. Habibilashkary1J. Martínez-Rodríguez2Departamento de Economa Aplicada e IMUVA, Facultad de Ciencias Económicas y Empresariales, Universidad de Valladolid, Avenida del Valle de Esgueva 6, 47011 Valladolid, SpainDepartamento de Economa Aplicada e IMUVA, Facultad de Ciencias Económicas y Empresariales, Universidad de Valladolid, Avenida del Valle de Esgueva 6, 47011 Valladolid, SpainDepartamento de Economa Aplicada e IMUVA, Facultad de Ciencias Económicas y Empresariales, Universidad de Valladolid, Avenida del Valle de Esgueva 6, 47011 Valladolid, SpainIn this paper, we analyze the role of the jump size distribution in the US natural gas prices when valuing natural gas futures traded at New York Mercantile Exchange (NYMEX) and we observe that a jump-diffusion model always provides lower errors than a diffusion model. Moreover, we also show that although the Normal distribution offers lower errors for short maturities, the Exponential distribution is quite accurate for long maturities. We also price natural gas options and we see that, in general, the model with the Normal jump size distribution underprices these options with respect to the Exponential distribution. Finally, we obtain the futures risk premia in both cases and we observe that for long maturities the term structure of the risk premia is negative. Moreover, the Exponential distribution provides the highest premia in absolute value.http://dx.doi.org/10.1155/2017/3286549 |
| spellingShingle | L. Gómez-Valle Z. Habibilashkary J. Martínez-Rodríguez The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices Abstract and Applied Analysis |
| title | The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices |
| title_full | The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices |
| title_fullStr | The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices |
| title_full_unstemmed | The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices |
| title_short | The Jump Size Distribution of the Commodity Spot Price and Its Effect on Futures and Option Prices |
| title_sort | jump size distribution of the commodity spot price and its effect on futures and option prices |
| url | http://dx.doi.org/10.1155/2017/3286549 |
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