The major goal of this research project is the pricing of derivatives on single commodities and commodity indices. Commodities and their derivatives gain more and more interest as an alternative asset class, offering high returns and diversification potential in combination with other asset classes. First of all an exhaustive overview of existing models for pricing commodity related instruments is given. Two of them, namely the mean-reversion and the local volatility model, are discussed in detail. Special attention is payed to the calibration of these models and the parameterization of the volatility surfaces. In a next step, the risk-neutral future distribution of a commodity portfolio is determined so that payoff profiles based on this underlying can be priced. In the empirical part of the paper, we exemplarily perform a pricing of call options on the DJUBS commodity index. We therefor replicate the index with a portfolio of correlated single commodities and calibrate the models for these single instruments to market prices of options. The choice of these instruments is made based on a liquidity analysis of traded commodities. Finally, the results of the presented methodology are compared to the classical Black approach.     «

The major goal of this research project is the pricing of derivatives on single commodities and commodity indices. Commodities and their derivatives gain more and more interest as an alternative asset class, offering high returns and diversification potential in combination with other asset classes. First of all an exhaustive overview of existing models for pricing commodity related instruments is given. Two of them, namely the mean-reversion and the local volatility model, are discussed in deta...     »