MSU Agricultural, Food, and Resource Economics
Dissertations, Theses and Plan B Papers -- Abstract
, Rui. Deriving Implied Distributions From Commodity Option Prices: An Application to Soybean, Corn and Wheat Using Mixture of Lognormals.
Plan B Paper,
Major Professor: Hanson.
This paper develops a method to estimate the distribution of futures price movements
from traded European options using a flexible mixture of lognormals distributional
assumption. More specifically, the objectives are: 1) develop an alternative
method for pricing commodity options when excess skewness and fat-tailed distributions
in the underlying futures price can be modeled as a mixture of two lognormal
processes. 2) apply this method to elicit implied distributions from corn, soybean,
and wheat futures option prices and test how well this forecasting model predicts
distribution. 3) evaluate the performance and forecasting ability of this alternative