TY  - JOUR
AU  - Carlson,Murray
AU  - Khokher,Zeigham
AU  - Titman,Sheridan
TI  - Equilibrium Exhaustible Resource Price Dynamics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12000
PY  - 2006
Y2  - February 2006
UR  - http://www.nber.org/papers/w12000
L1  - http://www.nber.org/papers/w12000.pdf
N1  - Author contact info:
Murray Carlson
Sauder School of Business
University of British Columbia
2053 Main Mall
Vancouver, BC v6T1Z2
E-Mail: murray.carlson@sauder.ubc.ca

Zeigham Khokher

Sheridan Titman
Finance Department
McCombs School of Business
University of Texas at Austin
Austin, TX 78712-1179
Tel: 512/232-2787
Fax: 512/471-5073
E-Mail: titman@mail.utexas.edu
AB  - We develop equilibrium models of an exhaustible resource market where both prices and extraction choices are determined endogenously. Our analysis highlights a role for adjustment costs in generating price dynamics that are consistent with observed oil and gas forward prices as well as with the two-factor prices processes that were calibrated in Schwartz and Smith (2000). Stochastic volatility aries in our two-factor model as a natural consequence of production for oil and natural gas prices. Differences between the endogenous price processes considered in earlier papers can generate significant differences in both financial and real option values.
ER  -