%0 Journal Article
%T A One-Factor Conditionally Linear Commodity Pricing Model under Partial Information
%A Takashi Kato
%A Jun Sekine
%A Hiromitsu Yamamoto
%J Quantitative Finance
%D 2014
%I arXiv
%R 10.1007/s10690-014-9182-y
%X A one-factor asset pricing model with an Ornstein--Uhlenbeck process as its state variable is studied under partial information: the mean-reverting level and the mean-reverting speed parameters are modeled as hidden/unobservable stochastic variables. No-arbitrage pricing formulas for derivative securities written on a liquid asset and exponential utility indifference pricing formulas for derivative securities written on an illiquid asset are presented. Moreover, a conditionally linear filtering result is introduced to compute the pricing/hedging formulas and the Bayesian estimators of the hidden variables.
%U http://arxiv.org/abs/1406.4275v1