NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Murray Carlson

Sauder School of Business
University of British Columbia
2053 Main Mall
Vancouver, BC v6T1Z2

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NBER Working Papers and Publications

February 2006Equilibrium Exhaustible Resource Price Dynamics
with Zeigham Khokher, Sheridan Titman: w12000
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.

Published: Carlson, Murray, Zeigham Khokher, and Sheridan Titman. "Equilibrium Exhaustible Resource Price Dynamics." Journal of Finance (2007). citation courtesy of

 
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