The dynamics of commodity prices

Brooks, C. ORCID: https://orcid.org/0000-0002-2668-1153 and Prokopczuk, M. (2013) The dynamics of commodity prices. Quantitative Finance, 13 (4). pp. 527-542. ISSN 1469-7696 doi: 10.1080/14697688.2013.769689

Abstract/Summary

In this paper we study the stochastic behavior of the prices and volatilities of a sample of six of the most important commodity markets and we compare these properties with those of the equity market. we observe a substantial degree of heterogeneity in the behavior of the series. Our findings show that it is inappropriate to treat different kinds of commodities as a single asset class as is frequently the case in the academic literature and in the industry. We demonstrate that commodities can be a useful diversifier of equity volatility as well as equity returns. Options pricing and hedging applications exemplify the economic impacts of the differences across commodities and between model specifications.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/31492
Item Type	Article
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Uncontrolled Keywords	Commodity prices, Stochastic volatility, Jumps, Markov chain Monte Carlo
Publisher	Taylor & Francis
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