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Abstract
This article suggests a pricing model for commodities used to produce biofuel. The
model is based on the concept that the deterministic component of the Wiener process
is not constant and depends on time and exogenous variables. The model, which incorporates
theory of storage, the convenience yield and the seasonality of harvests, was
applied in the Brazilian sugar market. After predictions were made with the Kalman
filter, the model produced results that were statistically more accurate than those
returned by the two-factor model available in the literature.