Next Article in Journal
Model Uncertainty in Operational Risk Modeling Due to Data Truncation: A Single Risk Case
Previous Article in Journal
Assessment of Policy Changes to Means-Tested Age Pension Using the Expected Utility Model: Implication for Decisions in Retirement
Article Menu
Issue 3 (September) cover image

Export Article

Open AccessArticle
Risks 2017, 5(3), 48; doi:10.3390/risks5030048

A Cointegrated Regime-Switching Model Approach with Jumps Applied to Natural Gas Futures Prices

1,†
,
2,†
and
1,†,*
1
Chair of Financial Mathematics, Technical University Munich, 80333 München, Germany
2
Department of Mathematics and Statistics, University of Calgary, Calgary, AB T2N 1N4, Canada
These authors contributed equally to this work.
*
Author to whom correspondence should be addressed.
Academic Editor: Mogens Steffensen
Received: 24 July 2017 / Revised: 30 August 2017 / Accepted: 7 September 2017 / Published: 12 September 2017
View Full-Text   |   Download PDF [655 KB, uploaded 12 September 2017]   |  

Abstract

Energy commodities and their futures naturally show cointegrated price movements. However, there is empirical evidence that the prices of futures with different maturities might have, e.g., different jump behaviours in different market situations. Observing commodity futures over time, there is also evidence for different states of the underlying volatility of the futures. In this paper, we therefore allow for cointegration of the term structure within a multi-factor model, which includes seasonality, as well as joint and individual jumps in the price processes of futures with different maturities. The seasonality in this model is realized via a deterministic function, and the jumps are represented with thinned-out compound Poisson processes. The model also includes a regime-switching approach that is modelled through a Markov chain and extends the class of geometric models. We show how the model can be calibrated to empirical data and give some practical applications. View Full-Text
Keywords: energy commodity futures; multi-factor model; seasonality effects; term structure; cointegration; regime switching; jumps; calibration energy commodity futures; multi-factor model; seasonality effects; term structure; cointegration; regime switching; jumps; calibration
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

Scifeed alert for new publications

Never miss any articles matching your research from any publisher
  • Get alerts for new papers matching your research
  • Find out the new papers from selected authors
  • Updated daily for 49'000+ journals and 6000+ publishers
  • Define your Scifeed now

SciFeed Share & Cite This Article

MDPI and ACS Style

Leonhardt, D.; Ware, A.; Zagst, R. A Cointegrated Regime-Switching Model Approach with Jumps Applied to Natural Gas Futures Prices. Risks 2017, 5, 48.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Risks EISSN 2227-9091 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top