VOLATILITY AND COMMODITY PRICE DYNAMICS

By Robert S. Pindyck. 2004

364 citations recorded by the source corpus.

Commodity prices are volatile, and volatility itself varies over time. Changes in volatility can affect market variables by directly affecting the marginal value of storage, and by affecting a component of the total marginal cost of production, the opportunity cost of producing the commodity now rather than waiting for more price information. I examine the role of volatility in short-run commodity market dynamics and the determinants of volatility itself. I develop a structural model of inventories, spot, and futures prices that explicitly accounts for volatility, and estimate it using daily and weekly data for the petroleum complex: crude oil, heating oil, and gasoline. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:1029–1047, 2004

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/0199f37fd3f68ad3bebdd23428aa64a5e007f13d

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Citations in the corpus

Oil price dynamics (2002-2006) (2008, neutral): “…including oil prices, for pricing derivatives (futures and options) has been presented in numerous papers: Casassus and Collin-Dufresne (2005), Carmona and Ludkovski (2005), Schwartz and Smith (2000), Schwartz (1997), Pindyck (2002), Postali and Picchetti (2006), and Gibson and Schwartz (1990).”
Forecasting the conditional volatility of oil spot and futures prices with structural breaks and long memory models (2012, background): “Obviously if oil price volatility persists, both producers and consumers may expose to substantial risk via the uncontrolled increases in inventory, transportation and production costs (Pindyck, 2004).”
Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases (2005, methodology): “Pindyck (2004a) studies the relationship between the volatility of a commodity, its price and inventory level.”
The dynamics of commodity prices (2013, neutral): “A full survey of such work is beyond the scope of this paper, but relevant studies include Serletis (1994), Ng and Pirrong (1996), Haigh and Holt (2002), Pindyck (2004), Sadorsky (2006), Alizadeh et al. (2008), and Wang et al. (2008).”
Does the carbon market help or hurt the stock price of electricity companies? Further evidence from the European context (2016, background): “Park and Ratti (2008), Pindyck (2004) and Bernanke (1983) similarly argued that the increased volatility in energy price could affect the present value of the discounted dividend stream, through increasing uncertainty about product demand or the future return on investments.”
Forward curves, scarcity and price volatility in oil and natural gas markets (2009, background): “Inventory and price volatility As documented by many authors (Pindyck (2004), Geman and Nguyen (2005)), commodity prices are volatile, and volatility itself varies over time.”
Capturing the Risk Premium of Commodity Futures: The Role of Hedging Pressure (2013, background): “Several studies (Litzenberger and Rabinowitz, 1995; Pindyck, 2004) suggest that changes in volatility could affect commodity price levels.”