NAKAJIMA Katsushi
   Department     College of International Management
   Position   Associate Professor
Language English
Publication Date 2012/11
Type Research paper (Academic/Professional Journal)
Peer Review Peer reviewed
Title A Cointegrated Commodity Pricing Model
Contribution Type Joint Work
Journal Journal of Futures Markets
Volume, Issue, Page 32(11),pp.995-1033
Author and coauthor 大橋和彦
Details We propose a commodity pricing model that extends the Gibson–Schwartz two-factor model to incorporate the effect of linear relations among commodity spot prices, and provide a condition under which such linear relations represent cointegration. We derive futures and call option prices for the proposed model, and indicate that, unlike in Duan and Pliska (2004), the linear relations among commodity prices should affect commodity derivative prices, even when the volatilities of commodity returns are constant. Using crude oil and heating oil market data, we estimate the model and apply the results to the hedging of long-term futures using short-term ones.
DOI https://doi.org/10.1002/fut.20553
ISSN 1096-9934