An empirical estimation for mean-reverting coal prices with long memory

Qi Sun, Weijun Xu and Weilin Xiao

Economic Modelling, 2013, vol. 33, issue C, 174-181

Abstract: In this paper we discuss the calibration issues of power models built on mean-reverting processes combined with long memory. The unknown parameters of fractional mean-reversion processes are estimated by a hybrid estimation method, which is built upon the marriage of the quadratic variation and the least squares. We perform a simulation study to test the efficiency of these estimators and to compare with the approach proposed by Høg (1999). Moreover, we apply our estimation procedure to some sample series of Chinese coal spot prices in real life situations. These results support the use of fractional mean-reversion processes in modeling Chinese coal prices.

Keywords: Energy model; Least squares estimation; Quadratic variations; Fractional mean-reversion processes; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: C15 C22 C32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:33:y:2013:i:c:p:174-181

DOI: 10.1016/j.econmod.2013.04.015

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