A multi-model approach for describing crude oil price dynamics

Araceli Bernabe, Esteban Martina, Jose Alvarez-Ramirez and Carlos Ibarra-Valdez

Physica A: Statistical Mechanics and its Applications, 2004, vol. 338, issue 3, 567-584

Abstract: This paper develops a stochastic multi-model approach to describe the dynamics of crude oil prices. Based on the hypothesis that crude oil price dynamics reflects the activity of a competitive market with multiple equilibria, a mean-reversion multi-model incorporating two competitive processes with corresponding drifts and volatilities is investigated. Regimen-switching between the two standard stochastic processes is modeled as a simple process that describes extreme (e.g., social, political, etc.) events occurring scarcely but influencing on the market evolution.

Keywords: Crude oil prices; Backward-bending supply; Multiple competitive equilibria; Mean-reverting (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:338:y:2004:i:3:p:567-584

DOI: 10.1016/j.physa.2004.03.007

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