Jump Processes in Natural Gas Markets

27 Pages Posted: 20 Feb 2014

See all articles by Charles F. Mason

Charles F. Mason

University of Wyoming - College of Business - Department of Economics

Neil A. Wilmot

University of Minnesota - Duluth - Department of Economics

Date Written: January 31, 2014

Abstract

Natural gas is likely to become increasingly important in the future. Understanding the stochastic underpinnings of natural gas prices will be critical, both to policy analysts and to market participants. To this end, we investigate the potential presence of jumps in natural gas spot prices in the U. S. and in the U. K. We find compelling empirical evidence for the importance of jumps in both markets, though jumps appear to appear more frequently in the U. K. Some of the difference between the U.S. and U.K. jump probabilities may be due to oil prices, other factors play a role.

Keywords: natural gas prices, jump diffusion, GARCH

JEL Classification: Q410, G170

Suggested Citation

Mason, Charles F. and Wilmot, Neil A., Jump Processes in Natural Gas Markets (January 31, 2014). CESifo Working Paper Series No. 4604. Available at SSRN: https://ssrn.com/abstract=2398238

Charles F. Mason (Contact Author)

University of Wyoming - College of Business - Department of Economics ( email )

P.O. Box 3985
Laramie, WY 82071-3985
United States
307-766-5336 (Phone)
307-766-5090 (Fax)

Neil A. Wilmot

University of Minnesota - Duluth - Department of Economics ( email )

MN
United States

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