We propose a novel representation of commodity spot prices in which the cost-of-carry and the spot price volatility are both driven by an arbitrary number of risk factors, nesting many existing specifications. The model exhibits unspanned stochastic volatility, provides simple closed-form...

We propose a novel, fast, accurate parallel algorithm for pricing American options. We perform a thorough numerical analysis of existing methodologies and find that ours performs significantly better. The proposed method is stable, robust, and converges monotonically. We also show that the...

In this paper we study deviations from the standard textbook no-arbitrage relationship of 14 index futures from Asia, Europe, and North America between 2001 and 2012. We find strong empirical evidence that such deviations are pervasive across different countries that differ in terms of...

There are two issues that are of central importance in term structure analysis. One is the modeling and estimation of the current term structure of spot rates. The second is the modeling and estimation of the dynamics of the term structure. These two issues have been addressed independently in...

In this paper we provide a new multi-factor stochastic model of commodity futures prices and propose a Kalman filter estimation procedure that may be applied to a panel data with missing observations. This model may be used to implement financial engineering applications which require the...

This article studies the ability of an N‐factor Gaussian model to explain the stochastic behavior of oil futures prices when estimated with the use of all available price information, as opposed to traditional approaches of aggregating data for a set of maturities. A Kalman filter estimation...

Thinly traded securities exist in both emerging and well developed markets. However, plausible estimations of market risk measures for portfolios with infrequently traded securities have not been explored in the literature. We propose a methodology to calculate market risk measures based on the...

Thinly traded securities exist in both emerging and well developed markets. However, plausible estimations of market risk measures for portfolios with infrequently traded securities have not been explored in the literature. We propose a methodology to calculate market risk measures based on the...

We examine weekly trading imbalances for speculators and small investors in the commodity futures market and their price and volatility effects over the period 1986-2012. First, speculators behave like short term momentum traders and long-term contrarians. Their imbalances are positively...