• DOI:10.2139/ssrn.3240490
Corpus ID: 158999692

Smile Modelling in Commodity Markets

@article{Nastasi2018SmileMI,
  title={Smile Modelling in Commodity Markets},
  author={E. Nastasi and A. Pallavicini and G. Sartorelli},
  journal={Econometric Modeling: Commodity Markets eJournal},
  year={2018}
}

E. Nastasi, A. Pallavicini, G. Sartorelli

Published 2018

Economics

Econometric Modeling: Commodity Markets eJournal

We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to deal with the limited number of options quoted in the market. Cleared commodity markets for futures and options are analyzed to include in the pricing framework specific trading clauses and margining procedures. Numerical examples for calibration and pricing… CONTINUE READING

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