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Modelling and forecasting crude oil price volatility is crucial in many financial and investment applications. The main purpose of this paper is to review and assess the current state of oil market volatility knowledge. It highlights the properties and characteristics of the oil price volatility that models seek to capture, and discuss the different modelling approaches to oil price volatility. Asymmetric response to price change, persistence and mean reversion, structural breaks, and possible market spillover of volatility are discussed. To complement the discussion, West Texas Intermediate futures price data are used to illustrate these properties using non‐parametric and conditional modelling methods. The generalised autoregressive conditional heteroskedasticity‐type models usually applied in the oil price volatility literature are also explored. We additionally examine the exogenous factors that may influence volatility in the oil markets.

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We consider a multinational firm that seeks to maximize its total amount of interest tax shield while following a constant debt ratio policy on a global level. The firm's total interest tax shield can then be considered as a piecewise-linear increasing function that is concave with respect to the firm's value. As a result, the expected interest tax shield can be much safer than the firm's free cash flow, depending on the firm's current value. With a simple no-arbitrage model, we derive the discount factor to apply to the total interest tax shield expected by the multinational firm. We show that this formula generalizes standard results of the literature on interest tax shields valuation.