The Convenience Yield Implied in the European Natural Gas Markets - The Impact of Macrofactors and Weather

Kremser, Thomas Reinhard; Rammerstorfer, Margarethe

doi:10.2139/ssrn.2146639

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Hubs and Descriptive Price Statistics1

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2014

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“…For HH and NBP co‐integration results and tests on a and b are reported in an alternative way in Figure . For ZEE and TTF related results are given in Kremser and Rammerstorfer ().…”

Section: Hubs and Descriptive Price Statisticsmentioning

confidence: 99%

A Convenience Yield Approximation Model for Mean‐Reverting Commodities

Dockner

Eksi

Rammerstorfer

2014

Journal of Futures Markets

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Standard option‐based approximations for convenience yields make use of the assumption that commodity spot prices follow a geometric Brownian motion. While there is some empirical support for this assumption, prices of a wide variety of (agricultural) commodities mean revert. Using a mean‐reverting spot price process we derive a novel convenience yield approximation analytically. It corresponds to the difference between the present values of two floating‐strike Asian options written on the spot and the futures prices, respectively. Using natural gas spot and futures price data from four different trading locations, we compare convenience yield estimates derived from existing approximations to those of our new measure. We find that convenience yield estimates vary substantially across approximation methods and that differences can be attributed to the cost of carry and the moneyness of the options. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:625–654, 2015

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“…For HH and NBP co‐integration results and tests on a and b are reported in an alternative way in Figure . For ZEE and TTF related results are given in Kremser and Rammerstorfer ().…”

Section: Hubs and Descriptive Price Statisticsmentioning

confidence: 99%