Subordinated affine structure models for commodity future prices

 

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dc.contributor.author Kateregga, Michael
dc.contributor.author Mataramvura, Sure
dc.contributor.author Taylor, David
dc.date.accessioned 2018-10-11T06:42:07Z
dc.date.available 2018-08-20
dc.date.available 2018-10-11T06:42:07Z
dc.date.issued 2018-08-20
dc.identifier.citation Kateregga, M., Mataramvura, S., Taylor, D. 2018-08-20. Subordinated affine structure models for commodity future prices. Cogent Economics & Finance. en_ZA
dc.identifier.issn 2332-2039 en_ZA
dc.identifier.uri http://hdl.handle.net/11427/28922
dc.description.abstract To date the existence of jumps in different sectors of the financial market is certain and the commodity market is no exception. While there are various models in literature on how to capture these jumps, we restrict ourselves to using subordinated Brownian motion by an α-stable process, α ∈ (0,1), as the source of randomness in the spot price model to determine commodity future prices, a concept which is not new either. However, the key feature in our pricing approach is the new simple technique derived from our novel theory for subordinated affine structure models. Different from existing filtering methods for models with latent variables, we show that the commodity future price under a one factor model with a subordinated random source driver, can be expressed in terms of the subordinator which can then be reduced to the latent regression models commonly used in population dynamics with their parameters easily estimated using the expectation maximisation method. In our case, the underlying joint probability distribution is a combination of the Gaussian and stable densities. en_ZA
dc.language eng en_ZA
dc.publisher Taylor and Francis en_ZA
dc.relation.ispartofseries Research papers en_ZA
dc.rights Creative Commons Attribution 4.0 International (CC BY 4.0) *
dc.rights.uri http://creativecommons.org/licenses/by/4.0/ en_ZA
dc.source Cogent Economics & Finance
dc.source.uri https://www.cogentoa.com/journal/economics-and-finance
dc.subject.other stable distributions
dc.subject.other affine structure models
dc.subject.other latent regression models
dc.title Subordinated affine structure models for commodity future prices en_ZA
dc.type Journal Article en_ZA
uct.type.publication Research en_ZA
uct.type.resource Article en_ZA
uct.subject.keywords stable distributions; affine structure models; latent regression models en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Commerce en_ZA
dc.publisher.department Division of Actuarial Science en_ZA
uct.type.filetype Text
uct.type.filetype Image


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