Assessment of Density Forecast for Energy Commodities in Post-Financialization Era

Bisht Deepak and A. K. Laha

IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: Probability density for the future price of an asset can be estimated from historical asset prices or exchange-traded derivatives. In this paper, prices of futures and options contracts that embed the forward-looking information are used to obtain the density forecast of the underlying asset under Q- measure. Along with Probability Integral Transform (PIT), various statistical testes are conducted to determine whether the option-implied density forecast is unbiased under the real world measure, P. We have worked with the settlement prices of NYMEX traded futures and options contracts for WTI crude oil and Henry Hub natural gas during the post-financialization period of 2006 to 2013. Statistical analysis of the PIT values indicate that the option-implied density forecast is unbiased under the real world measure, P.

Date: 2017-07-31
New Economics Papers: this item is included in nep-ene and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.iima.ac.in/sites/default/files/rnpfiles/5598294102017-07-01.pdf English Version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:14574

Access Statistics for this paper

More papers in IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department Contact information at EDIRC.
Bibliographic data for series maintained by ().