Spot Convenience Yield Models for the Energy Markets

@inproceedings{Carmona2003SpotCY,
  title={Spot Convenience Yield Models for the Energy Markets},
  author={Ren{\'e} Carmona and Michael Ludkovski},
  year={2003}
}
We review that part of the literature on energy spot price models which involves convenience yield as a factor, our goal being to document the shortcomings of the most commonly used models. From a mathematical point of view, the introduction of the convenience yield is usually justified by the desire to reconciliate dynamical models for the time evolution of commodity prices with standard arbitrage theory. Since the convenience yield appears as a factor which cannot be observed directly… CONTINUE READING

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