Chen, J., Ewald, C. and Kutan, A. M. (2019) Time-dependent volatility in futures contract options. Investment Analysts Journal, 48(1), pp. 30-41. (doi: 10.1080/10293523.2018.1560114)
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Abstract
The Schwartz (1997) two-factor model is the benchmark model for pricing futures options, and the volatility is constant, which is similar to the Black-Scholes model. In this paper, we use a similar method which can make the Black-Scholes model be a time-dependent volatility model to show that the time-dependent volatility is also valid in the Schwartz (1997) two-factor model. The time-dependent spot volatility results can be obtained easily and quickly in Matlab. We also explain why the time-dependent spot volatility results need to be tested theoretically and show how to ensure their correctness in both theory and practice.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Ewald, Professor Christian and CHEN, JILONG |
| Authors: | Chen, J., Ewald, C., and Kutan, A. M. |
| College/School: | College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Investment Analysts Journal |
| Publisher: | Taylor & Francis |
| ISSN: | 1029-3523 |
| ISSN (Online): | 2077-0227 |
| Published Online: | 11 February 2019 |
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