Modeling Commodity and Energy Prices

摘要

This section reviews specific models used for commodity derivative valuation. Section 4.1 introduces the microeconomics of market-clearing commodity prices and their dynamics. Sections 4.2 and 4.3 review reduced-form spot price evolution models and reduced-form modeling of the term structure of futures prices. In practice, these are the most common approaches used to model commodity prices. Section 4.4 gives an overview of a third modeling approach, equilibrium pricing, which is less tractable but more conceptually grounded in the underlying economics of commodities. Section 4.5 gives a brief review of the empirical evidence on commodity prices. Section 4.6 summarizes. Section 4.7 gives general pointers to the literature.