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Merchants operations involves valuing and hedging the cash flows of commodity and energy conversion assets as real options based on stochastic models that inevitably embed model error. In this paper we quantify how empirically calibrated model errors about the futures price term structure affect the valuation and hedging of commodity storage assets, specifically the storage of natural gas, an important energy source. We also explore ways to mitigate the impact of these errors. Our analysisdoi:10.2139/ssrn.2144025 fatcat:qswb2vgk2rahtlajkmwi5gpslm