The dynamics of commodity prices
Chris Brooks and
Marcel Prokopczuk ()
Quantitative Finance, 2013, vol. 13, issue 4, 527-542
In this paper we study the stochastic behavior of the prices and volatilities of a sample of six of the most important commodity markets and we compare these properties with those of the equity market. we observe a substantial degree of heterogeneity in the behavior of the series. Our findings show that it is inappropriate to treat different kinds of commodities as a single asset class as is frequently the case in the academic literature and in the industry. We demonstrate that commodities can be a useful diversifier of equity volatility as well as equity returns. Options pricing and hedging applications exemplify the economic impacts of the differences across commodities and between model specifications.
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Working Paper: The Dynamics of Commodity Prices (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:13:y:2013:i:4:p:527-542
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