This paper develops a closed-form model for options on commodities under the assumptions of mean-reversion in the commodity prices and regime-switching in the commodity returns volatility. After a closed-form solution for the option value in constant regimes has been developed, the model is...

We analyze how the presence of financial markets effects the optimal exercise of real options for a risk averse agent. In this process we examine the role of the minimal martingale measure and the Capital Asset Pricing Model (CAPM). Using value-matching and smooth-pasting conditions, we...

In this article we derive tractable analytic solutions for futures and options prices for a linear-quadratic jump-diffusion model with seasonal adjustments in stochastic volatility and convenience yield. We then calibrate our model to data from the fish pool futures market, using the extended...

In this article we derive tractable analytic solutions for futures and options prices for a linear-quadratic jump-diffusion model with seasonal adjustments in stochastic volatility and convenience yield. We then calibrate our model to data from the fish pool futures market, using the extended...

We price Asian options on commodity futures contracts in the presence of stochastic convenience yield, stochastic interest rates and jumps in the commodity spot price. We obtain a closed-form solution for the case of a geometric average option without the presence of jumps, both for continuous...

In this paper a pricing formula is derived for futures options in Schwartz 1997 two factor model with time dependent spot volatility. The pricing formula can be used like the Black-Scholes formula with observed volatility directly. Also, it can be used to find backwards the results of time...

In this paper, we introduce a new GARCH model with an infinitely divisible distributed innovation, referred to as the rapidly decreasing tempered stable (RDTS) GARCH model. This model allows the description of some stylized empirical facts observed for stock and index returns, such as volatility...