Which Risk Factors Drive Oil Futures Price Curves?

63 Pages Posted: 20 Sep 2016 Last revised: 3 Feb 2020

See all articles by Matthew Ames

Matthew Ames

ResilientML; The Institute of Statistical Mathematics

Guillaume Bagnarosa

ESC Rennes School of Business

Tomoko Matsui

The Institute of Statistical Mathematics

Gareth Peters

University of California Santa Barbara; University of California, Santa Barbara

Pavel V. Shevchenko

Macquarie University - Department of Actuarial Studies and Business Analytics

Date Written: December 30, 2019

Abstract

Supplementary material available at: https://ssrn.com/abstract=3312707

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.

Keywords: Crude oil futures, Theory of storage, Theory of normal backwardation, Hedging pressure, Futures Term structure

JEL Classification: C01, C1, C5, G13, Q02

Suggested Citation

Ames, Matthew and Ames, Matthew and Bagnarosa, Guillaume and Matsui, Tomoko and Peters, Gareth and Shevchenko, Pavel V., Which Risk Factors Drive Oil Futures Price Curves? (December 30, 2019). Available at SSRN: https://ssrn.com/abstract=2840730 or http://dx.doi.org/10.2139/ssrn.2840730

Matthew Ames (Contact Author)

ResilientML ( email )

Melbourne
Australia

The Institute of Statistical Mathematics ( email )

Tokyo
Japan

Guillaume Bagnarosa

ESC Rennes School of Business ( email )

2, RUE ROBERT D'ARBRISSEL
Rennes, 35065
France

Tomoko Matsui

The Institute of Statistical Mathematics ( email )

10-3 Midori-cho
Tachikawa-shi
Tokyo, 1908562
Japan

Gareth Peters

University of California Santa Barbara ( email )

Santa Barbara, CA 93106
United States

University of California, Santa Barbara ( email )

Pavel V. Shevchenko

Macquarie University - Department of Actuarial Studies and Business Analytics ( email )

Australia

HOME PAGE: http://www.mq.edu.au/research/centre-for-risk-analytics/pavel-shevchenko

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