Many commodity markets contain a strong seasonal component not only at the price level, but also in volatility. In this … paper, the importance of seasonal behavior in the volatility for the pricing of commodity options is analyzed. We propose a … option valuation formulas are derived. We then empirically study the impact of the proposed seasonal stochastic volatility …

We propose a new stochastic volatility model for pricing options on assets that exhibit seasonal trends in volatility … 3/2 stochastic volatility model, but includes a cyclical long-run volatility component. The model yields a closed …