Research On Commodity Forward Contract Pricing Model

Liquefied Natural Gas(LNG)has the advantages of less pollution,high safety,and easy storage.In recent years,its status in the energy industry has become higher and higher.China is the world 's largest LNG importer and consumer.LNG prices have an important impact on my country's economic development and residents' lives,and therefore to establish a rational pricing mechanism is very important.The paper is mainly based on stochastic volatility,cointegration and jumping to study the pricing model of LNG.The main achievements are as follows:(1)On the basis of the three-factor model in which the underlying asset price,rate of return,and convenience return all meet the mean recovery process,and for the phenomenon that asset prices have a "volatility smile",it is assumed that the volatility of asset prices meets the Heston stochastic volatility model,establish a pricing model based on stochastic volatility.Based on the data of U.S.LNG import prices from January 2010 to December 2018,use Ito 's lemma,moment estimation and other methods to determine the parameters in the model and establish a new LNG pricing model.Empirical analysis shows that the new model can effectively suppress the "volatility smile" and other phenomena.(2)Comprehensively consider the cointegration relationship between commodities and substitutes and the jump of the underlying asset price,the linear relationship between assets and the jump process are introduced on the basis of the three-factor model,and a pricing model based on cointegration and jump is established.The model is based on the US LNG import price data and WTI crude oil price data from January 2011 to December 2018 as an example.Equivalent martingale measures and Kalman filtering are used to obtain analytical solutions.Empirical analysis shows that the pricing model that integrates cointegration and jumping has a better performance in dealing with large jumps in LNG prices.