Title: A new approach for pricing commodity futures contracts

Authors: Lourdes Gomez-Valle, Julia Martinez-Rodriguez

Addresses: Departamento de Economia Aplicada (Matematicas), Universidad de Valladolid, Avenida del Valle Esgueva, 6, Valladolid 47011, Spain. ' Departamento de Economia Aplicada (Matematicas), Universidad de Valladolid, Avenida del Valle Esgueva, 6, Valladolid 47011, Spain

Abstract: In this article, we propose a new approach for pricing futures contracts more efficiently. We show that the coefficients of the pricing partial differential equation can be estimated directly from the data. We reduce the number of functions to be estimated as well as the computational cost. Finally, we carry out some numerical experiments.

Keywords: economics; Feynman–Kac solution; stochastic process; pricing; commodity futures; futures contracts; partial differential equations; PDE.

DOI: 10.1504/IJEBR.2009.022767

International Journal of Economics and Business Research, 2009 Vol.1 No.1, pp.109 - 117

Published online: 26 Jan 2009 *

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