Speculation and Volatility in the Crude Oil Futures Market PDF Download

Author: Yun Pan
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Samya Beidas-Strom
Publisher: International Monetary Fund
ISBN: 1498333486
Category : Business & Economics
Languages : en
Pages : 34

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How much does speculation contribute to oil price volatility? We revisit this contentious question by estimating a sign-restricted structural vector autoregression (SVAR). First, using a simple storage model, we show that revisions to expectations regarding oil market fundamentals and the effect of mispricing in oil derivative markets can be observationally equivalent in a SVAR model of the world oil market à la Kilian and Murphy (2013), since both imply a positive co-movement of oil prices and inventories. Second, we impose additional restrictions on the set of admissible models embodying the assumption that the impact from noise trading shocks in oil derivative markets is temporary. Our additional restrictions effectively put a bound on the contribution of speculation to short-term oil price volatility (lying between 3 and 22 percent). This estimated short-run impact is smaller than that of flow demand shocks but possibly larger than that of flow supply shocks.

Author: Thomas Hoehl
Publisher: GRIN Verlag
ISBN: 3656047715
Category : Business & Economics
Languages : en
Pages : 89

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Master's Thesis from the year 2011 in the subject Economics - Finance, grade: 8,0, Maastricht University (School of Business and Economics), language: English, abstract: This study finds that while a large part of the variation in crude oil futures prices is driven by fundamental factors, financial investment and speculation has the potential to aggravate reactions to changing fundamental variables and furthermore move prices on its own. The evidence is gathered by performing linear regressions and Granger Causality tests on futures returns, position data of different categories of futures traders on the New York Mercantile Exchange and proxies for relevant fundamental factors such as equity and exchange rate returns gathered from August 2006 to December 2010. While higher prices for crude oil naturally come along with increasing physical demand and finite world supply, future regulation might temper market volatility and guarantee that prices reflect a sustainable physical market equilibrium. The study also gives an overview of commodity market regulation and position limits on futures markets.

Author: Robert Cavender
Publisher:
ISBN:
Category :
Languages : en
Pages : 17

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Oil speculators take a lot of flak for the supposed "damage" they cause to the oil market and the economy as a whole. Price manipulation by speculators has been blamed for nearly all of the woes of our recent energy crisis. However, by transferring risk from producers to individuals who specialize in risk, futures markets in fact act to reduce the price variance that producers face in the market. This allows firms to produce oil on a much less sporadic basis, allowing for more stable prices for consumers. Speculation thus acts to calm the market, not to upset it. The purpose of this paper is to analyze how the introduction of an oil futures market affects the supply volatility of that commodity. I find that following the emergence of the futures market in oil, the volatility of oil production drops significantly from then on, even when controlling for varying factors.

Author: Sally Clubley
Publisher: Woodhead Publishing
ISBN: 9781855733879
Category : Business & Economics
Languages : en
Pages : 156

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Trading in oil futures and options is an introduction to price risk management in the worldwide oil industry. With numerous practical examples, it requires no prior knowledge and should be read by everyone involved in the industry. Although aimed primarily at those new to risk management it will also provide a useful theoretical background to more experienced managers and it will show those in other markets how the oil industry uses futures and other derivatives. This book concentrates on all the risk management tools available to everyone from crude oil producer to refined product consumer and explains the theory of futures, exchange options and over the counter trading.

Author: Hui Bu
Publisher:
ISBN:
Category :
Languages : en
Pages : 8

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This paper examines the behavior of crude oil futures price and volatility, analyzes the relationship between speculative traders' positions and returns, and investigates whether speculative traders' position changes have a significant effect on crude oil price. It also studies how speculation factor influence crude oil returns and volatility, whether returns are related to risks, and whether financial crises increase volatility in crude oil futures markets. The empirical results from Granger causality reveal that return lead speculative position, which indicates that non-commercial or managed money traders are a class of positive feedback traders or trend followers; and also reveal that the position changes held by speculative traders will cause crude oil price movement. Based on the estimation results of GARCH(1,1) model we verify position changes of non-commercial or managed money traders can impact crude oil futures returns significantly, and indicate returns are not related to conditional variance. Moreover, during the financial crisis, crude oil futures return shows an extreme large volatility. These findings can help us better understand price discovery process in crude oil futures market, and is useful in risk management and financial engineering.

Author:
Publisher:
ISBN:
Category : Natural gas
Languages : en
Pages : 56

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Author: Rui Wang
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Michael Hall Yan
Publisher:
ISBN:
Category :
Languages : en
Pages : 104

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This paper is intended to better understand the effects of speculation on crude oil prices. While speculation has many benefits such as increasing market liquidity and bearing market risks that other wish to offset, speculation can also create unwanted market volatility and economic bubbles. During the past decade, crude oil prices have been extremely volatile causing increased controversy between investors and regulators regarding the role that oil speculation has played in the price of crude oil. This report examines the relationship between crude oil spot and futures prices to determine the role arbitragers, speculators, and hedgers have had in crude oil pricing.

Author: United States. Congress. Senate. Committee on Homeland Security and Governmental Affairs. Permanent Subcommittee on Investigations
Publisher:
ISBN:
Category : Electronic government information
Languages : en
Pages : 264

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