Market information and price volatility in petroleum derivatives spot and futures markets

SUMMARYCrude oil, heating oil, and unleaded gasoline futures contracts are simultaneously analysed for their effectiveness in reducing price volatility for an energy trader. A conceptual model is developed for a trader hedging the 'crack spread'. Various hedge ratio estimation techniques are compared to a Multivariate GARCH model that directly incorporates the time to maturity effect often found in futures markets. Modelling of the time-variation in hedge ratios via the Multivariate GARCH methodology, and thus taking into account volatility spillovers between markets is shown to result in significant reductions in uncertainty even while accounting for trading costs.

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Unbiasedness and time varying risk premia in the crude oil futures market

Moosa

Al-Loughani

1994

Energy Economics

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Market information and price volatility in petroleum derivatives spot and futures markets

Cited by 4 publications

References 13 publications

The effectiveness of arbitrage and speculation in the crude oil futures market

The effectiveness of arbitrage and speculation in the crude oil futures market

Crack spread hedging: accounting for time‐varying volatility spillovers in the energy futures markets

Unbiasedness and time varying risk premia in the crude oil futures market

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