Commodity futures term structure model
Bull. Korean Math. Soc. 2014 Vol. 51, No. 6, 1791-1804
https://doi.org/10.4134/BKMS.2014.51.6.1791
Published online November 30, 2014
Hyeong In Choi, Song-Hwa Kwon, Jun Yeol Kim, and Du-Seop Jung
Seoul National University, The Catholic University of Korea, KYOBO Securities Co., Ltd., Korea Investment \& Securities Co., Ltd.
Abstract : A new approach to the commodity futures term structure model is introduced. The most salient feature of this model is that, once the interest rate model is given, the commodity futures price volatility is the only quantity that completely determines the model. As a consequence this model enables one to do away with the drudgeries of having to deal with the convenience yield altogether, which has been the most thorny point so far.
Keywords : commodity futures, term structure, convenience yield, volatility, European option, HJM
MSC numbers : Primary 60H30, 91G80
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