Commodity Price Dynamics and Derivatives Valuation: A Review
39 Pages Posted: 22 Aug 2012 Last revised: 29 Dec 2013
Date Written: August 21, 2012
This paper reviews extant research on commodity price dynamics and commodity derivatives pricing models. In the first half, we provide an overview of stylized facts of commodity price behavior that have been explored and documented in the theoretical and empirical literature. In the second half, we review existing derivatives pricing models and discuss how the peculiarities of commodity markets have been integrated in these models. We conclude the paper with a brief outlook on important research questions that need to be addressed in the future.
Keywords: commodities, derivatives, review
JEL Classification: G01
Suggested Citation: Suggested Citation