Download or read book Equilibrium Exhaustible Resource Price Dynamics written by Murray Carlson and published by . This book was released on 2006 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.