Commodity Price Dynamics and Derivatives Valuation: A Review

39 Pages Posted: 22 Aug 2012 Last revised: 29 Dec 2013

Janis Back

WHU - Otto Beisheim School of Management

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management; University of Reading - ICMA Centre

Date Written: August 21, 2012

Abstract

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

Back, Janis and Prokopczuk, Marcel, Commodity Price Dynamics and Derivatives Valuation: A Review (August 21, 2012). International Journal of Theoretical and Applied Finance, Vol. 16, No. 6, 2013. Available at SSRN: https://ssrn.com/abstract=2133158 or http://dx.doi.org/10.2139/ssrn.2133158

Janis Back

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar
Germany

Marcel Prokopczuk (Contact Author)

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

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