Time Delay and Noise Explaining Cyclical Fluctuations in Prices of Commodities
Uwe Küchler and
Eckhard Platen ()
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Uwe Küchler: Humboldt University
No 195, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney
This paper suggests to model jointly time delay and random effects in economics and finance. It proposes to explain the random and often cyclical fluctuations in commodity prices as a consequence of the interplay between external noise and time delays caused by the time between initiation of production and delivery. The proposed model is formulated as a stochastic delay differential equation. The typical behavior of a commodity price index under this model will be discussed. Methods for parameter estimation and the evaluation of functionals will be proposed.
Keywords: commodity prices; stochastic delay differential equation; cyclical behavior; scenario simulation; parameter estimation; autocorrelation function (search for similar items in EconPapers)
JEL-codes: G10 G13 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:uts:rpaper:195
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