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Commodity Futures and OTC Volatility
I am trying to price some commodity options. However, I am not sure how commodity volatility should be defined. It is not like interest rate world in which we can define precisely which strike and tenor the volatility is for.For commodity futures, the volatility is only valid up to the maturity of the future, which is normally middle of the last trading month. For commodity OTC options, Nov 06 Option expires on 11th Oct. Should this volatility be treated as Nov 06 tenor or Oct 06 tenor?Thanks in Advance. Lyn