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- Title
An RBF approach for oil futures pricing under the jump-diffusion model.
- Authors
Esfahani, Mohammad Karimnejad; Neisy, Abdolsadeh; De Marchi, Stefano
- Abstract
In this paper, our concern is to present and solve the problem of pricing oil futures. For this purpose, firstly we suggest a model based on the well-known Schwartz's model, in which the oil futures price is based on spot price of oil and convenience yield, however, the main difference here is that we have assumed that the former was imposed to some jumps, thus we added a jump term to the model of spot price. In our case, the oil future price model would be a Partial Integral Differential Equation (PIDE). Since, no closed form solution can be suggested for these kind of equations, we desire to solve our model with an appropriate numerical method. Although Finite Differences (FD) or Finite Elements (FE) is a common method for doing so, in this paper, we propose an alternative method based on Radial Basis Functions (RBF).
- Subjects
PETROLEUM sales &; prices; DIFFUSION measurements; DIFFERENTIAL equations; FRACTIONAL differential equations; PARTIAL algebras
- Publication
Journal of Mathematical Modeling (JMM), 2021, Vol 9, Issue 1, p81
- ISSN
2345-394X
- Publication type
Article
- DOI
10.22124/jmm.2020.15948.1396