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Lordkipanidze, Nasibrola
Tomek, William G.
Year of Publication: 
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Staff Paper No. SP 2014-02
Cornell University, Charles H. Dyson School of Applied Economics and Management, Ithaca, NY
The empirical evidence in this paper supports the existence of seasonality, time-to-maturity, and long-memory effects in the volatility of prices, but not in the returns themselves, in corn and soybean futures markets. This volatility is modeled as an Orenstein-Ulenbeck process driven by fractional Brownian motion. The inclusion of long-memory stochastic volatility is found to have a significant impact upon the term structure of implied volatilities, and should be able to provide better estimates of in- and out-of-the money optionsĀ“ prices.
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Working Paper

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