Cavalcante, Mileno (2010): An Analysis of the relationship between WTI term structure and oil market fundamentals in 2002-2009.
Download (432kB) | Preview
The main objective of this paper is to analyze the behavior of the term structure of the WTI futures market between 2002 and 2009, period known by a sustained price rise followed by a price slump and again by a new price rise. To achieve this goal, we use Principal Component Analysis (PCA) to decompose WTI futures price series into components which are used to explain series variability (e.g. changes in its term structure). After it, we try to identify how changes in oil markets fundamentals (physical and financial) may have contributed to oil futures term structure variability. The impact of these variables on WTI term structure is assessed using impulse-response functions and variance decomposition analysis. This work is of interest to market analysts, hedgers, and traders, among others, because it helps to clarify how changes in oil markets may affect their strategies in these markets.
|Item Type:||MPRA Paper|
|Original Title:||An Analysis of the relationship between WTI term structure and oil market fundamentals in 2002-2009|
|English Title:||An Analysis of the relationship between WTI term structure and oil market fundamentals in 2002-2009|
|Keywords:||WTI Term Structure; Principal Components Analysis; VARXs Models; Futures Pricing; Oil Market Fundamentals|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q49 - Other
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing ; Futures Pricing
|Depositing User:||Mileno T. Cavalcante|
|Date Deposited:||06. Aug 2010 11:26|
|Last Modified:||31. Dec 2015 02:32|
Carrion-i-Silvestre, J., Sansó-i-Rosselló, A., & Ortuño M., Unit root and stationary tests´wedding. Economic Letters 70, 2001, 1-8.
Cavalcante, M. T., Preços do petróleo e bolhas especulativas: algumas evidências para o mercado de WTI. Rio Oil & Gas Expo and Conference 2008 Proceedings, Rio de Janeiro, 2008.
Charemza, W. W. & Syczewska, E. M. Joint application of the dickey-fuller and kpss tests. Economic Letters 61, 1998, 17-21.
Chantziara, T. & Skiadopoulos, G., Can the dynamics of the term structure of petroleum futures be forecasted? Evindece from major markets. Energy Economics 30, 2008, 962-985.
Dudziński,M. L., Chmura, J. T., & Edwards, C. B. H., Repeatability of principal components in samples: normal and non-normal data sets compared. Multivariate Behavioral Research 10, 1975, 109-117.
Enders, W., Applied econometric time series, 2nd Edition, Singapore, Willey, 2004.
Hamilton, J. D., Time series analysis, Princeton, Princeton University Press, 1994.
Hull, J. C., Options, futures, and other derivatives, 6th Edition, Upper Saddle River, Prentice-Hall, 2006.
Järvinen, S., Dynamics of commodity curves. Helsinki School of Economics, Working Paper, 2003 (available at http://www.erasmusenergy.com/articles/71/1/Dynamics-of-Commodity-Forward-Curves/Page1.html).
Jolliffe, I. T., Principal component analysis, 2nd Edition, New York, Springer, 2002.
Kęobłwski, P. & Welfe, A., The adf-kpss test of joint confirmation hypothesis of unit autoregressive root. Economic Letter 85, 2004, 257-263.
Lautier, D., Segmentation in the crude oil futures term structure. Université Paris-Dauphine, Working Paper, 2004a (available at http://ideas.repec.org/p/ner/dauphi/urnhdl123456789-95.html).
Lautier, D., The term structure of crude oil futures prices: a principal component analysis. Université Paris-Dauphine, Centre de Recherches sur La Gestion, Working Paper, 2004b (available at http://ideas.repec.org/p/ner/dauphi/urnhdl123456789-877.html).
Litterman, R. & Scheinkman, J., Common factors affecting bond returns. The Journal of Fixed Income 1, 1991, 62–74.
Litterman, R., Scheinkam, J., & Weiss, L. Volatility and the yield curve. The Journal of Fixed Income 1, 1991, 49-53.
Manly, B. J. F., Métodos estatísticos multivariados: uma introdução. Porto Alegre, Bookman, 2008.
Merino, A. & Ortiz, A., Explaining the so-called price premium in oil markets, OPEC Energy Review, 2005, 135-152.
Meucci, A., Risk and asset allocation, New York, Springer, 2005.
Patterson, K., An introduction to applied econometrics: a time series approach, New York, Palgrave, 2000.
Shlens, J. A tutorial on principal component analysis: derivation, discussion, and singular value decomposition. Systems Neurobiology Laboratory, University of California, San Diego, December 2005.
Tolmasky, C. & Hindanov, D., Principal component analysis for correlated curves and seasonal commodities: the case of petroleum market. The Journal of Futures Markets 22, 2002, 1019-1035.
Tsay , R., Analysis of financial time series, 2nd Edition, Hoboken, Willey-Interscience, 2005.
Zivot, E. & Wang, J., Modelling financial time series with S-Plus, New York, Insightful Corporation & Springer, 2003.
Available Versions of this Item
- An Analysis of the relationship between WTI term structure and oil market fundamentals in 2002-2009. (deposited 06. Aug 2010 11:26) [Currently Displayed]