Commodity price dynamics : a structural approach / Craig Pirrong.

Format:

Book

Author/Creator:

Pirrong, Stephen Craig, 1959- author.

Language:

English

Subjects (All):

Prices.

Prices--Forecasting.

Commodity exchanges.

Physical Description:

1 online resource (xiii, 224 pages) : digital, PDF file(s).

Place of Publication:

Cambridge : Cambridge University Press, 2012.

Language Note:

English

Summary:

Commodities have become an important component of many investors' portfolios and the focus of much political controversy over the past decade. This book utilizes structural models to provide a better understanding of how commodities' prices behave and what drives them. It exploits differences across commodities and examines a variety of predictions of the models to identify where they work and where they fail. The findings of the analysis are useful to scholars, traders and policy makers who want to better understand often puzzling - and extreme - movements in the prices of commodities from aluminium to oil to soybeans to zinc.

Contents:

Cover; COMMODITY PRICE DYNAMICS; Title; Copyright; Contents; Preface; 1 Introduction; 1.1 Introduction; 1.2 A Commodity Taxonomy; 1.3 Commodity Markets and Data; 1.4 An Overview of the Remainder of the Book; 1.4.1 Modeling Storable Commodity Prices; 1.4.2 A Two-Factor Model of a Continuously Produced Commodity; 1.4.3 The Empirical Performance of the Two-Factor Model; 1.4.4 Commodity Pricing with Stochastic Fundamental Volatility; 1.4.5 The Pricing of Seasonally Produced Commodities; 1.4.6 The Pricing of Pollution Credits; 1.4.7 Non-Storable Commodities Pricing: The Case of Electricity

1.5 Where This Book Fits in the Literature2 The Basics of Storable Commodity Modeling; 2.1 Introduction; 2.2 Dynamic Programming and the Storage Problem: An Overview; 2.2.1 Model Overview; 2.2.2 Competitive Equilibrium; 2.2.3 The Next Step: Determining the Forward Price; 2.2.4 Specifying Functional Forms and Shock Dynamics; 2.3 A More Detailed Look at the Numerical Implementation; 2.3.1 Solving a PDE Using Finite Differences:The One-Dimensional Case; 2.3.2 Solving the 2D PDE; 2.3.3 Boundary Conditions; 2.4 Summary

3 High-Frequency Price Dynamics for Continuously Produced Commodities in a Two-Factor Storage Economy: Implications for Derivatives Pricing3.1 Introduction; 3.2 A Model of the Storage Economy; 3.2.1 Introduction; 3.2.2 Framework and Numerical Solution; 3.3 Moments and the State Variables; 3.4 Derivatives Pricing; 3.5 Extension: Storage Capacity Constraints; 3.6 Speculation and Price Dynamics; 3.7 Summary and Conclusions; 4 The Empirical Performance of the Two-Factor Storage Model; 4.1 Introduction; 4.2 Empirical Tests of the Theory of Storage: A Brief Literature Review

4.3 An Alternative Empirical Approach4.3.1 Overview; 4.3.2 The Extended Kalman Filter; 4.3.3 Parameter Choices and Data; 4.4 Results; 4.5 The Implications of the Model for the Speculation Debate; 4.6 Summary and Conclusions; 5 Stochastic Fundamental Volatility, Speculation, and Commodity Storage; 5.1 Introduction; 5.2 Speculation and Oil Prices; 5.3 The Storage Economy; 5.4 Equilibrium Competitive Storage; 5.5 Solution of the Storage Problem; 5.6 Results: Storage, Prices, and Spreads; 5.7 Results: The Time Series Behavior of Prices, Stocks, and Volatility; 5.8 Some Other Empirical Evidence

5.9 Conclusions6 The Pricing of Seasonal Commodities; 6.1 Introduction; 6.2 The Model; 6.3 Results; 6.4 Empirical Evidence; 6.5 Alternative Explanations for the Empirical Regularities; 6.5.1 Preferences; 6.5.2 Inventories as a Factor of Production; 6.5.3 Multiple Storable Commodities; 6.6 Summary and Conclusions; 7 The Dynamics of Carbon Markets; 7.1 Introduction; 7.2 The Model; 7.3 Results; 7.4 Summary; 8 The Structural Modeling of Non-Storables: Electricity; 8.1 Introduction; 8.2 Electricity Markets; 8.3 A Structural Model for Pricing Electricity Derivatives; 8.4 Model Implementation

8.5 Commonly Traded Power Options

Notes:

Title from publisher's bibliographic system (viewed on 05 Oct 2015).

Includes bibliographical references and indexes.

ISBN:

1-107-71288-2

1-283-37804-3

9786613378040

1-139-18881-X

1-139-01814-0

1-139-18753-8

1-139-19012-1

1-139-18290-0

1-139-18522-5

OCLC:

782876930