Filtering and forecasting commodity futures prices under an HMM framework

Paresh Date, Rogemar Mamon and Anton Tenyakov

Energy Economics, 2013, vol. 40, issue C, 1001-1013

Abstract: We propose a model for the evolution of arbitrage-free futures prices under a regime-switching framework. The estimation of model parameters is carried out using the hidden Markov filtering algorithms. Comprehensive numerical experiments on real financial market data are provided to illustrate the effectiveness of our algorithm. In particular, the model is calibrated with data from heating oil futures and its forecasting performance as well as statistical validity is investigated. The proposed model is parsimonious, self-calibrating and can be very useful in predicting futures prices.

Keywords: Markov chain; Change of measure; Multivariate HMM filtering; Oil future prices (search for similar items in EconPapers)
JEL-codes: C53 G17 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:40:y:2013:i:c:p:1001-1013

DOI: 10.1016/j.eneco.2013.05.016

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