Abstract
The increased oil prices worldwide are having a great impact on all economic
activities. That’s why research on the dynamic behavior of crude oil prices has
become a hot issue in recent years. Especially the recent changes in crude oil price
behaviour between 2007 and 2009 revived the question about the underlying
dynamics governing crude oil prices. To understand the behavior of the oil market
there is a need to understand the stochastic models of oil prices. Their dynamics
were characterized by high volatility, high intensity jumps, and strong upward
drift, indicating that oil markets were constantly out-of-equilibrium. The aim of
this study is to model oil price returns by Lévy process including the temporal,
spectral and distributional properties of the data set. Our findings could be helpful
for monitoring oil markets and we expect that the analysis presented in this paper
is useful for researchers and energy economists interested in predicting crude oil
price and return.
Keywords
References
- Applebaum, D. (2011), Lecture given at Koç University on Levy Process
- Brunett, Celso, 1999, “Long Memory, The Taylor Effect and Intraday Volatility in Commodity Futures Markets
- Barndorff-Nielsen, Ole E., Neil Shephard (2001), “Modelling by Lévy Processes for Financial Economics”, Birkhauser:Boston, pp.283-318.
- Clark, P. K., 1973, “A Subordinated Stochastic Process with Finite Variance for
- Speculative Prices,” Econometrica, Vol. 41, pp. 135–155. Cont, R. and Tankov, P., 2004, Financial Modeling with Jump Processes, (Chapman&Hall/CRC).
- Cortazara, G. and Schwartzb, E., 2003, “Implementing a Stochastic Model for Oil Futures Prices,”
- Fama, E.F., 1965, “The Behavior of Stock Market Prices,” Journal of Business, Vol. 34, 420–429.
- Hannan, E. J., Rissanen J. (1982), “Recursive Estimation of Mixed
- Autoregressive-Moving Average Order”, Biometrika, Vol. 69, No. 1, pp. 81-94
- Krichene, Noureddine, 2006 “Recent Dynamics of Crude Oil Prices,” IMF Working Paper
- Klüppelberg, Claudia, Alexander Lindner and Ross Maller (2004), “A Continuous
- Time GARCH Process Driven by a Lévy Process:Stationary and Second Order Behaviour”, Journal of Applied Probability, Vol. 41, pp.601-622
- Müller, G., Durand, R., Maller, R., Klüppelberg, C., “Analysis of stock market volatility by continuous-time GARCH models”, Stock Market Volatility, Chapman Hall/Taylor and Francis, London, pp. 31 50, 2009
Abstract
References
- Applebaum, D. (2011), Lecture given at Koç University on Levy Process
- Brunett, Celso, 1999, “Long Memory, The Taylor Effect and Intraday Volatility in Commodity Futures Markets
- Barndorff-Nielsen, Ole E., Neil Shephard (2001), “Modelling by Lévy Processes for Financial Economics”, Birkhauser:Boston, pp.283-318.
- Clark, P. K., 1973, “A Subordinated Stochastic Process with Finite Variance for
- Speculative Prices,” Econometrica, Vol. 41, pp. 135–155. Cont, R. and Tankov, P., 2004, Financial Modeling with Jump Processes, (Chapman&Hall/CRC).
- Cortazara, G. and Schwartzb, E., 2003, “Implementing a Stochastic Model for Oil Futures Prices,”
- Fama, E.F., 1965, “The Behavior of Stock Market Prices,” Journal of Business, Vol. 34, 420–429.
- Hannan, E. J., Rissanen J. (1982), “Recursive Estimation of Mixed
- Autoregressive-Moving Average Order”, Biometrika, Vol. 69, No. 1, pp. 81-94
- Krichene, Noureddine, 2006 “Recent Dynamics of Crude Oil Prices,” IMF Working Paper
- Klüppelberg, Claudia, Alexander Lindner and Ross Maller (2004), “A Continuous
- Time GARCH Process Driven by a Lévy Process:Stationary and Second Order Behaviour”, Journal of Applied Probability, Vol. 41, pp.601-622
- Müller, G., Durand, R., Maller, R., Klüppelberg, C., “Analysis of stock market volatility by continuous-time GARCH models”, Stock Market Volatility, Chapman Hall/Taylor and Francis, London, pp. 31 50, 2009
Details
| Other ID | JA43JV88FH |
|---|---|
| Journal Section | Articles |
| Authors | |
| Publication Date | June 1, 2012 |
| Published in Issue | Year 2012 Volume: 4 Issue: 1 |