Thursday 30 May – from 1:15pm to 2:15pm

Calendar Spread Options on Energy Commodities

Carme Frau, Assistant Professor, Department of Business Economics,  UIB University of Balearic Islands

Abstract:

In this work we calculate the expressions followed by the joint characteristic function (JCF) of futures log-prices, for a panel of seven extant models, aimed for pricing calendar spread options (CSO); these expressions are new in the literature. We also present the analytical expressions followed by the component terms of the JCF; those referring to the more recent models are also new in the literature. We perform a pricing exercise on European CSOs on WTI crude oil futures prices, whereby we follow the methodology described in Caldana & Fusai (2013) enabling us to use closed formulae. Finally we compare model accuracy between a panel of extant models.

Registration, please contact robin@em-lyon.com

Room 272 – Ecully campus