Skew–Brownian processes for estimating the volatility of crude oil Brent

Michele Bufalo, Brunero Liseo and Giuseppe Orlando

International Journal of Forecasting, 2025, vol. 41, issue 2, 763-780

Abstract: To predict the volatility of crude oil Brent price, we propose a novel econometric model 11The numerical results presented in this manuscript were reproduced by the Editor-in-Chief on 30 June 2024. where the explanatory variables are a combination of macroeconomic variables (i.e. price pressure), trade data (freight shipment index), and market sentiment (gold volatility). The model is proposed in two alternative variants: first, we assume Gaussian distributed quantities; alternatively, we consider the potential presence of skewness and adopt a Skew–Brownian process. We show that the suggested approach outperforms the selected baseline model as well as other models proposed in the literature, especially when turbulent periods occur.

Keywords: Brent crude; Forecasting; Volatility; Skew-normal distributions; Market sentiments; Price pressure (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:41:y:2025:i:2:p:763-780

DOI: 10.1016/j.ijforecast.2024.06.009

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