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Author: Xin (Shane) Gao
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This paper studies the spread of Brent-WTI futures prices using a no-arbitrage term structure model with one common and two latent idiosyncratic risk factors. We document more negative risk premia for WTI than for Brent, and the differences are more pronounced at longer maturities. The expectation of future spot price dominates the risk premium in determining the term structure of Brent-WTI futures spread, especially at short maturities. The common risk premia in both markets are negative and similar, while their corresponding idiosyncratic risk premia have opposite signs. The common risk prices of WTI and Brent are generally related to the US crude commercial stock, inflation, economic uncertainty, and hedging pressure; however, idiosyncratic risk prices are more related to their corresponding local production, short rate, and the term structure factors. The variance decomposition indicates that the idiosyncratic factors account for a considerable part at longer forecast horizons in both markets.
Author: Xin (Shane) Gao
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper studies the spread of Brent-WTI futures prices using a no-arbitrage term structure model with one common and two latent idiosyncratic risk factors. We document more negative risk premia for WTI than for Brent, and the differences are more pronounced at longer maturities. The expectation of future spot price dominates the risk premium in determining the term structure of Brent-WTI futures spread, especially at short maturities. The common risk premia in both markets are negative and similar, while their corresponding idiosyncratic risk premia have opposite signs. The common risk prices of WTI and Brent are generally related to the US crude commercial stock, inflation, economic uncertainty, and hedging pressure; however, idiosyncratic risk prices are more related to their corresponding local production, short rate, and the term structure factors. The variance decomposition indicates that the idiosyncratic factors account for a considerable part at longer forecast horizons in both markets.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 318
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Author: Paul Horsnell
Publisher: Oxford University Press, USA
ISBN:
Category : Business & Economics
Languages : en
Pages : 360
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Book Description
The market for North Sea Brent Oil directly determines the price of over one-half of the world trade in crude oil. This study analyzes the workings of the oil market and describes how crude oil prices are determined throughout the world. It covers OPEC pricing, futures markets for oil, the impact of the UK taxation regime, and the mechanisms by which the world price of oil is determined. The text should be of benefit to those working in the areas of futures and forward markets, OPEC behaviour, North Sea oil, oil taxation and oil prices.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 212
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Author: John Elder
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
This study examines price discovery among the two most prominent price benchmarks in the market for crude oil, WTI sweet crude and Brent sweet crude. Using data on the most active futures contracts measured at the one-second frequency, we find that WTI maintains a dominant role in price discovery relative to Brent, with an estimated information share in excess of 80%, over a sample from 2007 through 2012. Our analysis is robust to different decompositions of the sample, over pit-trading sessions and non-pit trading sessions, segmentation of days associated with major economic news releases, and data measured to the millisecond. We find no evidence that the dominant role of WTI in price discovery is diminished by the price spread between Brent that emerged in 2008.
Author: Angelic Raja Salha
Publisher:
ISBN:
Category : Petroleum
Languages : en
Pages : 0
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Book Description
The main purpose of our thesis is to examine the short term and long term relationship between the spot prices of two crude oil benchmarks, West Intermediate Texas (WTI) crude oil and Brent crude oil. We analyze the daily, weekly, and monthly spot price of WTI and Brent crude oil for the last 30 years in the period starting in May 1986 till May 2016. We start by testing for stationarity and find that the data has one unit root. After that, we test if the prices of WTI and Brent move together with a stable difference between them by applying Johansen, Engle-Granger, and ARDL tests. Then, we test the data for biasness by interpreting the coefficients in the regression equation and GARCH model. The empirical analysis shows that there is high evidence of short term and long term bias. Additionally, we test for volatility and whether good news and bad news affect the prices of WTI and Brent in the same way. We link the results to a tentative theory of production of two firms that produce ...
Author: Peter Wickham
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 30
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Book Description
This paper examines the behavior of crude oil prices since 1980, and in particular the volatility of these prices. The empirical analysis covers “spot” prices for one of the key internationally traded crudes, namely Dated Brent Blend. A GARCH (generalized autoregressive conditional heteroscedastic) model, which allows the conditional variance to be time-variant, is estimated for the period which includes the oil price slump of 1986 and the surge in prices in 1990 as a result of the Iraqi invasion of Kuwait. The paper also discusses the growth of futures and derivative markets and the dynamic links between spot and futures markets.
Author: Mr.Manmohan S. Kumar
Publisher: International Monetary Fund
ISBN: 1451951116
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
This paper undertakes an investigation into the efficiency of the crude oil futures market and the forecasting accuracy of futures prices. Efficiency of the market is analysed in terms of the expected excess returns to speculation in the futures market. Accuracy of futures prices is compared with that of forecasts using alternative techniques, including time series and econometric models, as well as judgemental forecasts. The paper also explores the predictive power of futures prices by comparing the forecasting accuracy of end-of-month prices with weekly and monthly averages, using a variety of different weighting schemes. Finally, the paper investigates whether the forecasts from using futures prices can be improved by incorporating information from other forecasting techniques.
Author: Tony Klein
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This article examines the interconnectedness of WTI and Brent prices on different resolutions of price movements. Firstly, within a multivariate BEKK framework we identify high but volatile correlations with recurring highs around 0.8 and multiple periods of decoupling. OPEC meetings increase the correlation in the short run. Secondly, linear l1-trends reveal that long-term movements of WTI and Brent are driven by the same dynamics, confirming the `one great pool' hypothesis. OPEC meetings have only little impact on long-term price trends. Thirdly, we find leading effects of WTI over Brent by short-term trends of several days, especially in a negative direction. These trends have an asymmetrical effect on volatility; negative trends cause a stronger increase than positive trends. These findings are of interest to policy makers as well as hedging strategies of crude oil portfolios and provide insight into long-term movements of crude prices.
Author: Bassam Fattouh
Publisher:
ISBN: 9781907555206
Category : Petroleum products
Languages : en
Pages : 83
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Book Description
