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This paper focuses on designing and pricing commodity derivatives and insurance within a novel financial engineering framework that can be subsequently tested empirically using commodity price data. Optimal contract solutions are obtained and interpreted. We quantify explicitly how derivative prices and insurance premiums are affected by economic variables linked to commodity supply and demand. Our results generalize some existing commodity derivative pricing models and further show under which conditions there will be no trading of derivative instruments and insurance. We report GMM estimates of the model parameters for a large dataset of commodity futures. These results also contribute to a better understanding of the “financialization” of commodities.

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How Do Economic Variables Affect the Pricing of Commodity Derivatives and Insurance?

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  • 出版模式：

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  • 发表日期：

    2025年

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  • Hirbod Assa,
  • Philippe Grégoire,
  • Gabriel J. Power,
  • Djerry Charli Tandja-M.

摘要

This paper focuses on designing and pricing commodity derivatives and insurance within a novel financial engineering framework that can be subsequently tested empirically using commodity price data. Optimal contract solutions are obtained and interpreted. We quantify explicitly how derivative prices and insurance premiums are affected by economic variables linked to commodity supply and demand. Our results generalize some existing commodity derivative pricing models and further show under which conditions there will be no trading of derivative instruments and insurance. We report GMM estimates of the model parameters for a large dataset of commodity futures. These results also contribute to a better understanding of the “financialization” of commodities.