Using Binomial Decision Trees to Solve Real-Option Valuation Problems
Decision Analysis
50th ANNIVERSARY ARTICLE: Option Pricing: Valuation Models and Applications
Management Science
The Effects of Financial Risks on Inventory Policy
Management Science
The valuation of multidimensional American real options using the LSM simulation method
Computers and Operations Research
Adaptive signal processing of asset price dynamics with predictability analysis
Information Sciences: an International Journal
Optimal Commodity Trading with a Capacitated Storage Asset
Management Science
International Journal of Systems Science
Optimal Control and Equilibrium Behavior of Production-Inventory Systems
Management Science
Optimal Inventory Policies when Purchase Price and Demand Are Stochastic
Operations Research
Valuation of Storage at a Liquefied Natural Gas Terminal
Operations Research
Efficient pricing of commodity options with early-exercise under the Ornstein-Uhlenbeck process
Applied Numerical Mathematics
Multiechelon Procurement and Distribution Policies for Traded Commodities
Management Science
Integrated Optimization of Procurement, Processing, and Trade of Commodities
Operations Research
Manufacturing & Service Operations Management
Lévy-Based Cross-Commodity Models and Derivative Valuation
SIAM Journal on Financial Mathematics
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In this article, we develop a two-factor model of commodity prices that allows meanreversion in short-term prices and uncertainty in the equilibrium level to which prices revert. Although these two factors are not directly observable, they may be estimated from spot and futures prices. Intuitively, movements in prices for long-maturity futures contracts provide information about the equilibrium price level, and differences between the prices for the short- and long-term contracts provide information about short-term variations in prices. We show that, although this model does not explicitly consider changes in convenience yields over time, this short-term/long-term model is equivalent to the stochastic convenience yield model developed in Gibson and Schwartz (1990). We estimate the parameters of the model using prices for oil futures contracts and apply the model to some hypothetical oil-linked assets to demonstrate its use and some of its advantages over the Gibson-Schwartz model.