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Mathematics Colloquium

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Date:  Thursday, February 18, 2010

Title:  Commodity Models, Derivatives and Real Options

Abstract:  We are all well aware of the role that commodities such as oil, electricity and natural gas play in our everyday lives. The financial markets on which these basic products trade fundamentally differ from traditional financial markets in several key ways. In particular, the difficulty of storage, and supply demand effects play a significant role in determining prices, which can exhibit large spikes and mean-reverting trends. In this talk, I will describe basic features of commodity prices, approaches for modeling them, including stochastic volatility models and multi-factor affine models, valuation methodologies for commodity derivatives, including singular perturbation and Fourier transform approaches, and stochastic optimal control problems that arise when incorporating risk and ambiguity aversion.


Speaker:  Sebastian Jaimungal
Institution:  University of Toronto

 

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