Analytically pricing crude oil options under a jump-diffusion model with stochastic liquidity risk and convenience yield

IF 3.8 3区经济学 Q1 BUSINESS, FINANCE

North American Journal of Economics and Finance Pub Date : 2025-03-28 DOI:10.1016/j.najef.2025.102424

Sha Lin , Meiling Chen , Xin-Jiang He

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Abstract

This study investigates the pricing issue of European crude oil options in a market with imperfect liquidity. We adopt a jump-diffusion model incorporating stochastic convenience yield to simulate crude oil price evolution, adjusted for the impacts of stochastic liquidity risk. A risk-neutral measure is established based on the Feynman-Kac theorem, followed by the presentation of a closed-form formula for determining the fair delivery price of the crude oil futures contract. This further give rise to an analytical price of the crude oil options. Novel formula’s correctness is verified by numerical tests that compare the analytical answer with Monte Carlo simulation. In conclusion, an empirical analysis is carried out to validate the proposed model using the crude oil options data available on the Shanghai International Energy Exchange (INE). The findings are contrasted to a benchmark model with constant liquidity, demonstrating the relevance of introducing stochastic liquidity into crude oil option pricing.

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具有随机流动性风险和便利收益的跳跃扩散模型下原油期权的解析定价

本文研究了流动性不完全市场下欧洲原油期权的定价问题。我们采用一个包含随机便利收益的跳跃-扩散模型来模拟原油价格的演变，并对随机流动性风险的影响进行了调整。基于Feynman-Kac定理，建立了一个风险中性测度，并给出了确定原油期货合约公平交割价格的封闭公式。这进一步产生了原油期权的分析价格。通过数值试验，将解析解与蒙特卡罗模拟结果进行比较，验证了新公式的正确性。最后，利用上海国际能源交易所（INE）的原油期权数据对本文提出的模型进行了实证分析。研究结果与具有恒定流动性的基准模型进行了对比，证明了在原油期权定价中引入随机流动性的相关性。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

North American Journal of Economics and Finance Multiple-

CiteScore

7.30

自引率

8.30%

发文量

168

期刊介绍： The focus of the North-American Journal of Economics and Finance is on the economics of integration of goods, services, financial markets, at both regional and global levels with the role of economic policy in that process playing an important role. Both theoretical and empirical papers are welcome. Empirical and policy-related papers that rely on data and the experiences of countries outside North America are also welcome. Papers should offer concrete lessons about the ongoing process of globalization, or policy implications about how governments, domestic or international institutions, can improve the coordination of their activities. Empirical analysis should be capable of replication. Authors of accepted papers will be encouraged to supply data and computer programs.