Abstract
We develop extensions that introduce regression structure to the multi-factor stochastic models of commodity futures price term structure dynamics. We demonstrate the accuracy with which these models can be calibrated to oil futures data and how they improve on existing models both in model fit and in model interpretation. We found leading observable factors that contribute to explaining the term structure of oil futures, in the presence of long and short term stochastic factors, included the dollar index, inventories, commodity indices and risk aversion associated to financial intermediaries. Furthermore, we determine the time frame on which these factors are explanatory.
Original language | English |
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Article number | 104676 |
Journal | Energy Economics |
Volume | 87 |
Early online date | 17 Jan 2020 |
DOIs | |
Publication status | Published - Mar 2020 |
Keywords
- Crude oil futures
- Futures Term structure
- Hedging pressure
- Theory of normal backwardation
- Theory of storage
ASJC Scopus subject areas
- Structural Biology
- Biochemistry
- Molecular Biology
- Economics and Econometrics
- General Energy