European Parliament Library

Subordinated Levy Processes and Applications to Crude Oil Options, Noureddine Krichene

Abstract
One approach to oil markets is to treat oil as an asset, besides its role as a commodity. Speculative and nonspeculative activity by investors in the derivatives markets could be responsible for a sizable increase in oil prices. This paper recognizes both the consumption and investment aspects of crude oil and proposes Levy processes for modeling uncertainty and options pricing. Calibration to crude oil futures' options shows high volatility of oil futures prices, fat-tailed, and right-skewed market expectations, implying a higher probability mass on crude oil prices remaining above the futures' level. These findings support the view that demand for futures contracts by investors could lead to excessively high price volatility
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. MODELING UNCERTAINTY IN ASSETS PRICES: LEVY PROCESSES""; ""III. SUBORDINATION AND TIME CHANGED-LEVY PROCESSES""; ""IV. MARKET INCOMPLETENESS AND ESSCHER TRANSFORM""; ""V. OPTION PRICING USING CHARACTERISTIC FUNCTIONS""; ""VI. APPLICATION TO CRUDE OIL OPTIONS: THE INVERSE PROBLEM""; ""VII. CONCLUSIONS""; ""References""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (26 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9786613829429

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