Aiming to study pricing of long-dated commodity derivatives, this paper presents a class of models within the Heath, Jarrow, and Morton (1992) framework for commodity futures prices that incorporates stochastic volatility and stochastic interest rate and allows a correlation structure between...

Since 2008, the usually negative crude oil futures spread has been positive for extended periods, raising doubts about conventional explanations. We re-examine the dynamics of the futures spread using monthly VARs on the CME WTI oil futures spread, OECD and U.S. oil and petroleum inventories and...

Does modelling stochastic interest rates, beyond stochastic volatility, improve pricing performanceon long-dated commodity derivatives? To answer this question, we consider futuresprice models for commodity derivatives that allow for stochastic volatility and stochastic interestrates and a...

This paper presents an empirical study on hedging long-dated crude oil futures options with forward price models incorporating stochastic interest rates and stochastic volatility. Several hedging schemes are considered including delta, gamma, vega and interest rate hedge. Factor hedging is...

This paper analyses the attributes and the significance of the roughness of oil market volatility. We employ unspanned stochastic volatility models driven by rough Brownian motions that yield semi-analytical prices for futures options entailing efficient calibration applications. By performing a...