Comparative-statics results for financial options are often assumed to hold for real options. But the effects of higher volatility need not be increased value and postponed investment. This depends on signs of correlations and what parameters are held constant. For real options, the...

This study examines the nexus between precious metals (gold and silver) and oil (crude oil and heating oil) realized volatilities introducing a novel quantile extended joint connectedness framework combining quantile vector autoregression (White et al., 2015) with the extended joint...

This paper deals with three aspects of spectacular oil price episodes such as the one witnessed in 2008. First, the concept of temporary explosiveness is proposed as an empirical method for capturing this type of behavior. The application of a recently proposed recursive unit root test shows...

I provide, in this paper, evidence on the contribution of crude oil excess volatility to the volatility index. Crude oil leads the volatility index by 16 basis points (BP) 6 months ahead of time. This leadership is reversal and covers the period from January 21, 2000 to the end of 2011. The...

The relationships between crude and product prices are crucial throughout oil markets and especially so within the refining industry, where they define the refinery margin between cost of inputs (crudes) and value of outputs (products). The oil market is global but regional factors are also...

This paper analyzes the valuation of day-ahead Physical Transmission Rights (PTRs) on the German-Dutch interconnector. From a financial perspective, PTRs are options written on the difference between the German and Dutch hourly electricity prices. We propose a model for the valuation of...

This paper presents implied volatility smiles and skews for plain vanilla electricity options based on a new bid stack model developed in a previous paper. This underlying bid stack model for the electricity market is extended to the case of an arbitrary number N of technology classes embedded...

Geopolitical events are widely reported in the press and may influence the risk premium demanded by investors in addition to demand and supply of energy resources. Using the daily geopolitical risk index of Caldara and Iacoviello (2018), we demonstrate that geopolitical risk plays an important...

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...

Recent developments in biofuel technologies have resulted in heightened linkages between the petroleum and agricultural sectors. As such, a large price and/or volatility shift experienced in one sector is now more likely to spill-over into the other. In trying to capture the interrelations...