Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/310032 
Year of Publication: 
2023
Citation: 
[Journal:] Annals of Operations Research [ISSN:] 1572-9338 [Volume:] 336 [Issue:] 1 [Publisher:] Springer US [Place:] New York, NY [Year:] 2023 [Pages:] 275-306
Publisher: 
Springer US, New York, NY
Abstract: 
Mean reversion, stochastic volatility, convenience yield and presence of jump clustering are well documented salient features of commodity markets, where Asian options are very popular. We propose a model which takes into account all these stylized features. We first state our model under the historical measure, then, after introducing a structure preserving change of measure, we provide a risk-neutral version of the same model and we show how to price geometric and arithmetic Asian options. To this end, we derive semi-closed formulas for the geometric Asian options price and develop a computationally efficient simulation scheme for the price process, allowing to price the arithmetic counterparts using control variate technique. Finally, we propose a simple econometric experiment to document presence of jump clusters in commodity prices and evaluate the performances of the proposed simulation scheme on some parameter sets calibrated on real data.
Subjects: 
Commodity derivatives
Multifactor affine stochastic volatility models
Self-exciting jumps
Simulation
Asian options
JEL: 
C15
C63
G13
Q02
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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