On the volatility of commodity futures prices

Publication Type:
Chapter
Citation:
Nonlinear Economic Dynamics and Financial Modelling: Essays in Honour of Carl Chiarella, 2014, pp. 315 - 334
Issue Date:
2014-05-01
Full metadata record
Files in This Item:
Filename Description Size
10.1007978-3-319-07470-2_18.pdf Published version2.41 MB
Adobe PDF
© 2014 Springer International Publishing Switzerland. All rights are reserved. This paper analyzes the volatility structure of commodity futures markets by using a continuous time forward price model with stochastic volatility. The model features three distinct volatility structures, each one potentially assessing the impact of long-term, medium-term and short-term variation, respectively. Using an extensive 21 year database of commodity futures prices, the model is estimated for six key commodities: gold, crude oil, natural gas, soybean, sugar and corn. The model is well suited to identify the shape and the persistence of each volatility factor, their contribution to the total variance, the extent to which commodity futures volatility can be spanned, and the nature of the return-volatility relation.
Please use this identifier to cite or link to this item: