 Determinants of oil futures prices and convenience yieldsM. A. H. Dempster, Elena Medova and Ke Tang Quantitative Finance, 2012, vol. 12, issue 12, 1795-1809 Abstract: Commodity futures prices are usually modelled using affine term structure spot price models with latent factors extracted from the data. However, very little research to date has considered the question -- What are the economic drivers behind the calibrated latent factors? This paper addresses this question in the context of a three-factor -- short-, medium- and long-term -- model for crude oil spot prices by studying the relations between these factors and appropriate economic variables. An affine combination of the short- and medium-term factors is identified as the (instantaneous) convenience yield. Estimating a structural vector auto-regression model we find that the short-term factor mainly relates to demand variables in the physical markets and to trading variables in the futures markets (such as the net short position of commercial hedgers), the medium-term factor relates to business cycles, demand and trading variables, and the long-term factor relates mainly to financial factors. Date: 2012 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:12:y:2012:i:12:p:1795-1809 Ordering information: This journal article can be ordered from DOI: 10.1080/14697688.2012.691202 Access Statistics for this article Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral More articles in Quantitative Finance from Taylor & Francis Journals |
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