Spot Price Modelling of Industrial Metals – An heterogeneous agent based model for Copper

Helyette Geman and Matthias Scheiber
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Helyette Geman: Department of Economics, Mathematics & Statistics, Birkbeck
Matthias Scheiber: Department of Economics, Mathematics & Statistics, Birkbeck

No 1404, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: We will show in this paper the role of inventories in explaining copper price volatility. Using a three factor model we derive a fundamental long-term value for copper. Second, we emphasis the significance of this fundamental long-term value by considering an agent based model approach in which mean-reversion focused fundamental investors trade with chartists who follow price trends. We show that fundamental investors take increasing positions in copper when the spot price of copper deviated from its fundamental value (i.e. the fundamental value is higher than the spot price) and chartists loose relative significance.

Keywords: Heterogeneous agent based modelling; copper spot price modelling; 3 factor stochastic volatility model; Runge Kutta; Kalman Filter. (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-cmp
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https://eprints.bbk.ac.uk/id/eprint/15283 First version, 2014 (application/pdf)

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