{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,14]],"date-time":"2026-10-14T10:47:12Z","timestamp":1791974832196,"version":"4.4.0"},"posted":{"date-parts":[[2026]]},"group-title":"SSRN","reference-count":0,"publisher":"Elsevier BV","license":[{"start":{"date-parts":[[2026,1,1]],"date-time":"2026-01-01T00:00:00Z","timestamp":1767225600000},"content-version":"unspecified","delay-in-days":0,"URL":"https:\/\/www.uspto.gov\/ip-policy\/copyright-policy\/copyright-basics"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>&lt;p&gt;&lt;span&gt;This project investigates the valuation of American commodity options&amp;nbsp;&lt;\/span&gt;&lt;span&gt;using the&amp;nbsp;&lt;\/span&gt;&lt;span&gt;Schwartz two-factor model. We employ the double-sweep Al&lt;\/span&gt;&lt;span&gt;ternating Direction Explicit (ADE) method, an unconditionally stable (for&amp;nbsp;&lt;\/span&gt;&lt;span&gt;diffusion) finite difference scheme that provides the efficiency of explicit&amp;nbsp;&lt;\/span&gt;&lt;span&gt;marching with the stability typically reserved for implicit methods, and com&lt;\/span&gt;&lt;span&gt;pare it with the single-sweep alternating variant of Saul\u2019yev. We derive the&amp;nbsp;&lt;\/span&gt;&lt;span&gt;governing partial differential equation (PDE) and transform the semi-infinite domain into a rectangular computational domain. Furthermore, we apply Fichera theory to determine boundary conditions at the limits of the spot price. Finally, we implement the solver in C++, validating the results first against the closed form solution of the PDE and Monte Carlo as a European option, then apply the American early exercise constraint and benchmark against Longstaff-Schwartz Monte Carlo to analyze numerical accuracy and convergence. The framework is then extended, following feedback from a commodities trader to exercise on futures prices and use seasonal parameters.&lt;\/span&gt;&lt;\/p&gt;<\/jats:p>","DOI":"10.2139\/ssrn.7604358","type":"posted-content","created":{"date-parts":[[2026,10,14]],"date-time":"2026-10-14T10:04:56Z","timestamp":1791972296000},"source":"Crossref","is-referenced-by-count":0,"title":["Pricing American Commodity Options Under the Schwartz Two-Factor Model Using the Alternating Direction Explicit (ADE) Method"],"prefix":"10.2139","author":[{"given":"Sanjith","family":"Prabhu","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Daniel","family":"Duffy","sequence":"additional","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","container-title":[],"original-title":[],"deposited":{"date-parts":[[2026,10,14]],"date-time":"2026-10-14T10:04:56Z","timestamp":1791972296000},"score":1,"resource":{"primary":{"URL":"https:\/\/www.ssrn.com\/abstract=7604358"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2026]]},"references-count":0,"URL":"https:\/\/doi.org\/10.2139\/ssrn.7604358","relation":{},"subject":[],"published":{"date-parts":[[2026]]},"subtype":"preprint"}}