The Mineral Resources Pricing Model Based on the Mix-Copula-EGARCH Model

DOI: https://doi.org/10.62517/jse.202611313

Author(s)

Mou Taiyong

Affiliation(s)

School of Economics and Management, GuangZhou Institute of Science and Technology , China

Abstract

Effective assessment of mineral resources has an important impact on the market allocation of mineral resources. The traditional discounted cash flow (DCF) method fails to appropriately express the uncertainty information about the market. In this paper, the pricing of mineral assets is studied from the perspective of real options. Firstly, the mining resource mining rights are expressed as binary real options with the underlying assets taken as the resource reserves value and the convenience yield. Next, the calculation model of the convenience yield is given. Considering the asymmetric volatility process of assets, the EGARCH model is selected to represent the volatility of assets, and the marginal distribution information of assets income under the risk-neutral measure is obtained through the transformation of the risk-neutral measure. Considering the impact of the complex dynamic relationship among assets on mineral resources pricing, the Gumbel Copula function and the Clayton Copula function are selected to describe the upper-tail and lower-tail correlation of assets, while the Mix-Copula function combining these two Copula functions is established to describe the non-linear correlation of assets. By combining the advantages of both the EGARCH model and the Mix-Copula function, the mineral resource pricing model based on the Mix-Copula-EGARCH model is established to price mineral resources. The research objects of four non-ferrous metals, i.e. zinc, nickel, copper and tin, are selected, the Monte Carlo method is adopted for empirical analysis of them, and comparisons with traditional resource pricing methods are also made. The empirical results show that the mineral resource pricing model based on the Mix-Copula-EGARCH model proposed in this paper can better reflect the market value of mineral resources and it is superior to other traditional pricing methods.

Keywords

Mineral Resources; EGARCH Model; Copula Function; Real Options; Monte Carlo

References

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