Abstract
In this paper, I prove the closed-form extension of the Schwartz and Smith (2000) model of commodity futures pricing to state-dependent risk premia. The extended model exhibits important additional flexibility in representing different term-structure patterns.
| Original language | English |
|---|---|
| Pages (from-to) | 1-7 |
| Number of pages | 7 |
| Journal | MATHEMATICAL FINANCE LETTERS |
| Volume | Math. Finance Lett. 2015, 2015:7 |
| Publication status | Published - 2015 |
Keywords
- Backwardation.
- Commodity futures pricing
- Normal backwardation
- State-dependent risk premia
- Term structure of futures prices
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