Cross-Commodity Modelling by Multivariate Ambit Fields
25 Pages Posted: 21 Jan 2014
Date Written: January 20, 2014
This paper proposes a multivariate model for commodity forward curves which is based on multivariate ambit fields.We show how a multivariate ambit field can be used to describe complex dependencies between commodities while staying in a tractable multivariate martingale framework. Moreover, we study in detail how spread options can be priced in our new ambit framework. Here we consider both calendar spreads written on one commodity as well as spread options on different commodity futures.
Keywords: Ambit fields, commodities, forward prices, spread options
JEL Classification: C10, G10
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