Explaining the convenience yield in the WTI crude oil market using realized volatility and jumps

Sévi, Benoît

doi:10.1016/j.econmod.2014.10.026

Cited by 21 publications

(10 citation statements)

References 52 publications

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“…In the futures market, the highest daily losses and gains can be observed for the energy, precious metals, and industrial metals sectors (in line with findings by Auer, 2014;Doran & Ronn, 2008;Sévi, 2015). For example, silver and nickel (natural gas and WTI crude oil) exhibit the most significant losses (gains), of -19.49% and -18.26% (18.77% and 13.34%), respectively.…”

Section: Characteristics Of the Full Samplesupporting

confidence: 81%

Performance ranking (dis)similarities in commodity markets

Zhang

Auer

Vortelinos

2018

Global Finance Journal

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In this article, we revisit recent evidence indicating that the choice of performance measure appears to be irrelevant for the ranking of investment alternatives in the commodity market. Extending the previous literature in several important ways, we provide the following insights into the rankings produced by the 13 most popular performance measures for 24 commodities. First, ranking differences are somewhat larger in the spot market than in the futures market. Second, when we use daily instead of monthly data, performance measures that model reward based on average returns still produce similar performance rankings. However, when data of higher frequency is used for performance measures modeling reward based on higher partial moments, performance rankings differ crucially from those produced by measures focusing on average returns. Finally, the degree of ranking (dis)similarity appears to vary over time. Empirically, then, the choice of performance measure can matter. Nevertheless, our findings do not invalidate recent theoretical results on ranking similarity, because population rankings may not be identical with sample rankings, which are subject to estimation error

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Section: Characteristics Of the Full Samplesupporting

confidence: 81%

Performance ranking (dis)similarities in commodity markets

Zhang

Auer

Vortelinos

2018

Global Finance Journal

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“…At an index level, we find that futures jumps are an important ingredient when explaining CDS spread changes, with negative 2 In the following we will be also referring to Tauchen and Zhou (2011) and Wright and Zhou (2009) who investigate the explanatory power of jumps, either for bond yield spreads or bond excess returns, but do not consider the CDS market. Notice also the works on WTI crude oil futures contracts by Sévi (2014Sévi ( , 2015, with the former underlining the role of jumps to forecast volatility while the latter focuses on convenience yield. The work of Naifar (2012) considers the relationship between CDS spreads and jumps but within a very different mathematical framework, namely, using copulas.…”

Section: Accepted M Manuscriptmentioning

confidence: 99%

Explaining Credit Default Swap Spreads by Means of Realized Jumps and Volatilities in the Energy Market

2015

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This paper studies the relationship between credit default swap (CDS) spreads for the Energy sector and oil futures dynamics. Using data on light sweet crude oil futures from 2004 to 2013, which contains a crisis period, we examine the importance of volatility and jumps extracted from the futures in explaining CDS spread changes. The analysis is performed at an index level and by rating group; as well as for the pre-crisis, crisis and post-crisis periods. Our findings are consistent with Merton's theoretical framework. At an index level, futures jumps are important when explaining CDS spread changes, with negative jumps having higher impact during the crisis. The continuous volatility part is significant and positive, indicating that futures volatility conveys relevant information for the CDS market. As for the analysis per rating group, negative jumps have an increasing importance as the credit rating deteriorates and during the crisis period, while the results for positive jumps and futures volatility are mixed. Overall, the relation between the CDS market and the futures market is stronger during volatile periods and strengthened after the Global Financial Crisis.JEL Classification: G12, G13, C14

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“…The effect of the term structure can differ depending on which rationale we follow. The large majority of studies have focused on explaining the characteristics of the basis or convenience yield itself (e.g., Casassus, Liu, & Tang, 2013;Milonas & Paratsiokas, 2017;Omura, Todorova, Li, & Chung, 2015;Sévi, 2015) and how these yields are related to business cycles (e.g., Fernandez, 2016).…”

Section: Introductionmentioning

confidence: 99%

The quantile dependence of commodity futures markets on news sentiment

Omura

Todorova

2019

Journal of Futures Markets

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Focusing on energy commodities, industrial metals, and gold, this paper examines the degree to which commodity futures returns depend on news sentiment under various market conditions, and the structure of that dependence. We observe an asymmetric market reaction to positive and negative news sentiment, which changes in periods of financial turmoil. The quantile regression analysis shows that news sentiment's influence on the futures returns follows an upward trend at higher percentiles. This structure flattens for positive news during the global financial crisis, while the slope for the negative component steepens in backwardation periods.

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Explaining the convenience yield in the WTI crude oil market using realized volatility and jumps

Cited by 21 publications

References 52 publications

Performance ranking (dis)similarities in commodity markets

Performance ranking (dis)similarities in commodity markets

Explaining Credit Default Swap Spreads by Means of Realized Jumps and Volatilities in the Energy Market

The quantile dependence of commodity futures markets on news sentiment

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