Details
| Original language | English |
|---|---|
| Pages (from-to) | 527-542 |
| Number of pages | 16 |
| Journal | Quantitative Finance |
| Volume | 13 |
| Issue number | 4 |
| Publication status | Published - 1 Apr 2013 |
| Externally published | Yes |
Abstract
In this paper we study the stochastic behavior of the prices and volatilities of a sample of six of the most important commodity markets and we compare these properties with those of the equity market. we observe a substantial degree of heterogeneity in the behavior of the series. Our findings show that it is inappropriate to treat different kinds of commodities as a single asset class as is frequently the case in the academic literature and in the industry. We demonstrate that commodities can be a useful diversifier of equity volatility as well as equity returns. Options pricing and hedging applications exemplify the economic impacts of the differences across commodities and between model specifications.
Keywords
- Commodity prices, Jumps, Markov chain Monte Carlo, Stochastic volatility
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
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In: Quantitative Finance, Vol. 13, No. 4, 01.04.2013, p. 527-542.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - The dynamics of commodity prices
AU - Brooks, Chris
AU - Prokopczuk, Marcel
PY - 2013/4/1
Y1 - 2013/4/1
N2 - In this paper we study the stochastic behavior of the prices and volatilities of a sample of six of the most important commodity markets and we compare these properties with those of the equity market. we observe a substantial degree of heterogeneity in the behavior of the series. Our findings show that it is inappropriate to treat different kinds of commodities as a single asset class as is frequently the case in the academic literature and in the industry. We demonstrate that commodities can be a useful diversifier of equity volatility as well as equity returns. Options pricing and hedging applications exemplify the economic impacts of the differences across commodities and between model specifications.
AB - In this paper we study the stochastic behavior of the prices and volatilities of a sample of six of the most important commodity markets and we compare these properties with those of the equity market. we observe a substantial degree of heterogeneity in the behavior of the series. Our findings show that it is inappropriate to treat different kinds of commodities as a single asset class as is frequently the case in the academic literature and in the industry. We demonstrate that commodities can be a useful diversifier of equity volatility as well as equity returns. Options pricing and hedging applications exemplify the economic impacts of the differences across commodities and between model specifications.
KW - Commodity prices
KW - Jumps
KW - Markov chain Monte Carlo
KW - Stochastic volatility
UR - http://www.scopus.com/inward/record.url?scp=84876127926&partnerID=8YFLogxK
U2 - 10.1080/14697688.2013.769689
DO - 10.1080/14697688.2013.769689
M3 - Article
AN - SCOPUS:84876127926
VL - 13
SP - 527
EP - 542
JO - Quantitative Finance
JF - Quantitative Finance
SN - 1469-7688
IS - 4
ER -