NAKAJIMA Katsushi    Department   Ritsumeikan Asia Pacific University  College of International Management    Position   Associate Professor
Language	English
Publication Date	2016/03
Type	Research paper (Academic/Professional Journal)
Peer Review	Peer reviewed
Title	Commodity Spread Option with Cointegration
Contribution Type	共著
掲載誌名	Asia-Pacific Financial Markets
巻・号・頁	23(1),pp.1-44
著者・共著者	大橋和彦
概要	We derive the valuation formula of a European call option on the spread of two cointegrated commodity futures prices, based on the Gibson–Schwartz with cointegration (GSC) model. We also analyze the American commodity spread option including the early exercise premium representation and an analytical approximation valuation formulae with cointegration. In the numerical analysis, we compare the spread option values calculated by the GSC model and the Gibson–Schwartz (GS) model that ignores cointegration. Consistent with the intuition that the cointegration prevents the prices from diverging, the GSC model prices the commodity spread option lower than the GS model which have longer maturity of more than 6 years. In other words, the GS model may overprice the commodity spread options for those with longer maturity without taking account of cointegration.
DOI	https://doi.org/10.1007/s10690-015-9207-1
ISSN	1387-2834