q-fin updates on arXiv.org
Mon, 27 Jan 2020 06:01:15 GMT language
We present a stochastic-local volatility model for derivative contracts on
commodity futures able to describe forward-curve and smile dynamics with a fast
calibration to liquid market quotes. A parsimonious parametrization is
introduced to deal with the limited number of options quoted in the market.
Cleared commodity markets for futures and options are analyzed to include in
the pricing framework specific trading clauses and margining procedures.
Numerical examples for calibration and pricing are provided for different