Commodity Price Forecasts, Futures Prices and Pricing Models

Gonzalo Cortazar, Cristobal Millard, Hector Ortega and Eduardo S. Schwartz

No 22991, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Even though commodity pricing models have been successful in fitting the term structure of futures prices and its dynamics, they do not generate accurate true distributions of spot prices. This paper develops a new approach to calibrate these models using not only observations of oil futures prices, but also analysts’ forecasts of oil spot prices. We conclude that to obtain reasonable expected spot curves, analysts’ forecasts should be used, either alone, or jointly with futures data. The use of both futures and forecasts, instead of using only forecasts, generates expected spot curves that do not differ considerably in the short/medium term, but long term estimations are significantly different. The inclusion of analysts’ forecasts, in addition to futures, instead of only futures prices, does not alter significantly the short/medium part of the futures curve, but does have a significant effect on long-term futures estimations.

JEL-codes: G13 G17 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-for
Note: AP
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Citations: View citations in EconPapers (5)

Published as Gonzalo Cortazar & Cristobal Millard & Hector Ortega & Eduardo S. Schwartz, 2019. "Commodity Price Forecasts, Futures Prices, and Pricing Models," Management Science, vol 65(9), pages 4141-4155.

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