A new energy model to capture the behavior of energy price processes

Weijun Xu, Qi Sun and Weilin Xiao

Economic Modelling, 2012, vol. 29, issue 5, 1585-1591

Abstract: Owing to the vague fluctuation of energy prices from time to time, a new energy model, which considers both the mean-reverting behavior and the long memory property, is proposed in this paper. Since the problem of estimating parameters, in discrete time for this model, plays a central role in forecast inference, the problem of estimating the unknown parameters has been dealt with for the fractional Ornstein–Uhlenbeck process observed discretely. The asymptotic properties of these estimates are also provided. The numerical simulation results confirm the theoretical analysis and show that our method is effective. To show how to apply our approach in realistic contexts, an empirical study of energy in China, namely Daqing crude oil, is presented. The empirical results seem reasonable when compared to the real data.

Keywords: Energy model; Maximum likelihood estimation; Malliavin calculus; Fractional Ornstein–Uhlenbeck processes; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: C15 C22 C32 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:5:p:1585-1591

DOI: 10.1016/j.econmod.2012.05.009

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