Modeling commodity prices under the CEV model
Geman, Hélyette and Shih, Yih-Fong (2009) Modeling commodity prices under the CEV model. Journal of Alternative Investments 11 (3), pp. 65-84. ISSN 1520-3255.
This paper introduces the constant elasticity of variance (CEV) model for commodity prices and examines its calibration to four strategic commodity trajectory prices over the period 1990 - 2007 by using a Generalized Method of Moments. Six other models are compared to the CEV one by performing a test of goodness-of-fit. Estimating the model for crude oil, coal, copper and gold and comparing the results during the sub- periods 1990-1999 and 2000-2007, we find that the constant elasticity of variance exponent can efficiently account for the stochastic volatility observed after 2000 in commodity prices. Moreover, we exhibit that although mean- reverting processes well captured the pattern of commodity prices prevailing before 2000, they do not apply to the recent past.
|Additional Information:||Full-text not yet cleared for open access by publisher|
|School:||Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics|
|Research Centre:||Commodities Finance Centre|
|Date Deposited:||01 Dec 2010 14:06|
|Last Modified:||07 Dec 2016 15:31|
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