This paper studies commodity spot, forward, and futures prices under a continuous-time setting. Our model considers a representative firm, which uses an input commodity to produce an output commodity, stores the commodity, and trades forward or futures commodities to hedge. Through the...

We derive the valuation formula of a European call option on the spread of two cointegrated commodity prices, based on the GSC (Gibson-Schwartz with cointegration) model. We also analyze the American commodity spread option including the early exercise premium representation and an analytical...

This study analyzes the relationships of commodity spot and futures prices with convenience yield. Convenience yield is received by the owner of a spot commodity but not by the owner of the right to the commodity (e.g., futures). This is the first study to explicitly model commodity spot and...