Anderson Graduate School of Management, UCLA. This research has been partially supported (Rajna Gibson) by the Swiss National Fund for Scientific Research.
Stochastic Convenience Yield and the Pricing of Oil Contingent Claims
Article first published online: 30 APR 2012
1990 The American Finance Association
The Journal of Finance
Volume 45, Issue 3, pages 959–976, July 1990
How to Cite
GIBSON, R. and SCHWARTZ, E. S. (1990), Stochastic Convenience Yield and the Pricing of Oil Contingent Claims. The Journal of Finance, 45: 959–976. doi: 10.1111/j.1540-6261.1990.tb05114.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This paper develops and empirically tests a two-factor model for pricing financial and real assets contingent on the price of oil. The factors are the spot price of oil and the instantaneous convenience yield. The parameters of the model are estimated using weekly oil futures contract prices from January 1984 to November 1988, and the model's performance is assessed out of sample by valuing futures contracts over the period November 1988 to May 1989. Finally, the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time.