Moeti Ncube

Hi, I believe I provided some reference in the pdf document included within the code.

By initial parameters do you mean the forward and vol prices? If so I just used the current forward/vols prices from the market on the valuation date.

The correlation parameters could probably use a bit more analysis but I just took some rough estimates based off of historical movements.

Following 9/4/2013 subject.
Thank you very much for your answer. I have two more comments/questions:
1) In your optimization problem, when you impose Var(S(T)_obs) = Var(S(T)) we could have written also
Var(log(S(T))) = marketvola^2*T
since the forward condition is already imposed. Maybe your setting is better because you dont need weights?
2) The market volatility you are using is Black volatility of an option on S(T) = F(T,T), the spot, isn't it?. We could also have imposed the volatility condition on options expiring at Ti on F(Ti,Tj) futures with Ti<Tj. Have you tried that?
Thanks again

I really like this work. Thanks.
I'm just a beginner in commodity derivatives. I d want to know what exactly is this 'market volatility', is it the Black volatility associated to an option with payoff (S_T-K)_+. Have you tried to calibrate volatility to options on futures? Thanks!

Great job. Just a question : where I can find the theoretical reference of a(t|t_1), P(t|t_1) and others formulas defined into the functions kalman filter and kalman smoothing?