# Laplacian Split-BREAK Process with Application in Dynamic Analysis of the World Oil and Gas Market

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## Abstract

**:**

## 1. Introduction

## 2. Definition and Structure of the LSB Process

**Theorem**

**1.**

^{2}-continuity.

- (a)
- If the fluctuations of innovations (${\epsilon}_{t}$) were emphasized in the previous moment in time, it follows ${\theta}_{t-1}=0$. Thus, equality (9) becomes ${X}_{t}={\epsilon}_{t}$.
- (b)
- Fluctuations ${\epsilon}_{t-1}$ whose square do not exceed the critical value $c$ imply ${\theta}_{t-1}=1$. Thus, the value of ${X}_{t}$ is given as a linear, integrated MA(1) process ${X}_{t}={\epsilon}_{t}-{\epsilon}_{t-1}.$.

**Theorem**

**2.**

## 3. Distributional Features of the LSB Process

**Theorem**

**3.**

**Proof.**

**Remark**

**1.**

**Theorem**

**4.**

**Proof.**

**Remark**

**2.**

**Theorem**

**5.**

- (i)
- When$1\le \alpha \le 3/2$, both series${\stackrel{-}{M}}_{t;\alpha}$and${\stackrel{-}{Y}}_{t;\alpha}$have an asymptotically normal distribution, i.e., the following relations, when$t\to +\infty $, are valid:$${\stackrel{-}{M}}_{t;\alpha}~\mathcal{N}\left(\mu {t}^{1-\alpha},\frac{2{a}_{c}{\lambda}^{2}{t}^{3-2\alpha}}{3}\right),{\stackrel{-}{Y}}_{t;\alpha}~\mathcal{N}\left(\mu {t}^{1-\alpha},\frac{2{a}_{c}{\lambda}^{2}{t}^{3-2\alpha}}{3}\right).$$
- (ii)
- When$\alpha >3/2$, both series${\stackrel{-}{M}}_{t;\alpha}$and${\stackrel{-}{Y}}_{t;\alpha}$are asymptotically vanishing, i.e.,$${\stackrel{-}{M}}_{t;\alpha}\stackrel{d}{\u27f6}{I}_{0},{\stackrel{-}{Y}}_{t;\alpha}\stackrel{d}{\u27f6}{I}_{0},t\to +\mathrm{\infty}.$$

**Proof.**

**Remark**

**3.**

## 4. Procedures for Parameter Estimation

#### 4.1. Moments-Based Estimators

**Theorem**

**6.**

**Proof.**

**Remark**

**4.**

#### 4.2. Gauss–Newton and Maximum Likelihood Estimators

**Theorem**

**7.**

**Proof.**

**Remark**

**5.**

#### 4.3. Estimators of the Mean Value

## 5. Numerical Simulations of the LSB Estimators

## 6. Application in Dynamic Analysis of the World Oil and Gas Market

## 7. Conclusions

## Author Contributions

## Funding

## Data Availability Statement

## Conflicts of Interest

## Abbreviations

AD test | Anderson–Darling test (statistics) |

AN | Asymptotic Normality |

AR process | Autoregressive process |

CDF | Cumulative Distribution Function |

CF | Characteristic Function |

CLD | Contaminated Laplacian Distribution |

DF | Degrees of Freedom |

GSB process | Gaussian Split-BREAK process |

IID | Independent Identical Distributed |

LSB process | Laplacian Split-BREAK process |

MA process | Moving Average process |

ML method | Maximum Likelihood method |

MSEE | Mean Square Estimated Error |

NASDAQ | National Association of Securities Dealers Automated Quotations |

Probability Density Function | |

RV | Random Variable |

Split-MA process | Splitting Moving Average process |

STOPBREAK | Stochastic Permanent Breaking |

W test | Cramér–von Mises test (statistics) |

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**Figure 1.**Histograms of the empirical distributions of log-returns fitted with Gaussian and Laplace distributions.

**Figure 2.**Dynamics of the non-stationary and stationary series of the LSB process (parameter values are: $\mu =0$ and $c=\lambda =1$).

**Figure 3.**Plots of CDFs (

**a**) and PDFs (

**b**) of increments $\left({X}_{t}\right)$, regarded as a mixed distribution of Laplacian distributed innovations $\left({\epsilon}_{t}\right)$, and two chi-square-based distributions (parameter values are: $\mu =0,$ $\lambda =1$, ${b}_{c}=0.5$).

**Figure 4.**Convergences of modulus of the characteristic functions ${\phi}_{m}\left(u/\sqrt{t},t\right)$ and ${\phi}_{y}\left(u/\sqrt{t},t\right)$, when $t=1,2,\dots ,500$ (parameter values are the same as in Figure 3).

**Figure 5.**(

**a**) Plots of the asymptotic variances of the estimators ${\stackrel{~}{b}}_{c}$ (dashed line) and ${\widehat{b}}_{c}$ (solid line). (

**b**) Plot of the ratio ${\widehat{V}}_{2}/{\stackrel{~}{V}}_{2}$ of the asymptotic variances of the estimators ${\widehat{\lambda}}^{2}$ and ${\stackrel{~}{\lambda}}^{2}$.

**Figure 6.**Histograms of empirical distributions of the estimated parameters (true parameter values are the same as in Table 1).

**Figure 7.**Dynamics of prices and trading volumes of energy products on the world market in the period from 2018 to 2023: (

**a**) crude oil; (

**b**) natural gas.

**Figure 8.**Dynamic diagrams of empirical and modelled data: (

**a**) log-volumes (solid lines) and martingale means (dashed lines); (

**b**) increments (solid lines) and innovation series (dashed lines). The diagrams above present the dynamics of Series A, and below are the dynamics of Series B.

**Figure 9.**Empirical distributions of actual data (given by histograms), along with the corresponding fitted PDFs (given by lines): (

**a**) Series A; (

**b**) Series B.

**Table 1.**Summary statistics of the estimated parameter values of the LSB process, along with the realized statistics of their normality tests (true parameter values are: $\mu =0$ and $c=\lambda =1$).

Parameter Estimators | Statistics | Estimated Values | AD (p-Value) | W (p-Value) | |
---|---|---|---|---|---|

Critical Value | $\stackrel{~}{c}$ | Min. | 0.5769 | 0.9908 * (0.0129) | 0.1791 ** (0.0099) |

Mean | 1.0257 | ||||

(MSEE) | (3.63 × 10 ^{−2}) | ||||

Max. | 2.0964 | ||||

$\widehat{c}$ | Min. | 0.7142 | 0.3202 (0.5320) | 0.0441 (0.6059) | |

Mean | 0.9944 | ||||

(MSEE) | (7.19 × 10 ^{−3}) | ||||

Max. | 1.2685 | ||||

Scale Parameter | $\stackrel{~}{\lambda}$ | Min. | 0.7829 | 0.5413 (0.1641) | 0.0702 (0.2773) |

Mean | 1.0026 | ||||

(MSEE) | (5.36 × 10 ^{−3}) | ||||

Max. | 1.2394 | ||||

$\widehat{\lambda}$ | Min. | 0.8592 | 0.4244 (0.3173) | 0.0588 (0.3920) | |

Mean | 1.0028 | ||||

(MSEE) | (2.52 × 10 ^{−3}) | ||||

Max. | 1.1702 | ||||

Mean Value | $\stackrel{~}{\mu}$ | Min. | −56.420 | 0.1843 (0.9088) | 0.0282 (0.8701) |

Mean | 0.3491 | ||||

(MSEE) | (252.01) | ||||

Max. | 55.208 | ||||

$\widehat{\mu}$ | Min. | −38.595 | 0.2508 (0.7417) | 0.0289 (0.8621) | |

Mean | 0.1647 | ||||

(MSEE) | (96.62) | ||||

Max. | 33.0875 |

**Table 2.**Basic statistical and market indicators of crude oil and natural gas in the last five years.

Statistics | Crude Oil | Natural Gas | ||||
---|---|---|---|---|---|---|

Price | Volumes | Log-Volumes | Price | Volumes | Log-Volumes | |

Mean | 65.42 | 4.22 × 10^{5} | 16.832 | 3.591 | 1.22 × 10^{5} | 12.672 |

Median | 64.62 | 3.88 × 10^{5} | 17.102 | 2.855 | 1.17 × 10^{5} | 12.789 |

Mode | 67.04 | N/A | N/A | 2.662 | 1.66 × 10^{5} | 12.717 |

Sample Variance | 397.1 | 5.41 × 10^{10} | 0.8172 | 3.274 | 3.56 × 10^{9} | 0.8194 |

Stand. Deviation | 19.94 | 2.33 × 10^{5} | 0.9040 | 1.809 | 5.97 × 10^{4} | 0.9052 |

Minimum | 9.060 | 1.23 × 10^{4} | 11.617 | 1.482 | 1.20 × 10^{3} | 8.281 |

Maximum | 123.7 | 1.69 × 10^{6} | 18.273 | 9.680 | 4.35 × 10^{5} | 14.56 |

Statistics | Series A | Series B | ||||
---|---|---|---|---|---|---|

$\left({\mathit{X}}_{\mathit{t}}^{\left(1\right)}\right)$ | $\left({\mathit{m}}_{\mathit{t}}^{\left(1\right)}\right)$ | $\left({\mathit{\epsilon}}_{\mathit{t}}^{\left(1\right)}\right)$ | $\left({\mathit{X}}_{\mathit{t}}^{\left(2\right)}\right)$ | $\left({\mathit{m}}_{\mathit{t}}^{\left(2\right)}\right)$ | $\left({\mathit{\epsilon}}_{\mathit{t}}^{\left(2\right)}\right)$ | |

Mean | 3.52 × 10^{−5} | 16.898 | −0.0196 | 1.17 × 10^{−5} | 12.688 | −0.0713 |

Median | −0.0577 | 17.127 | −0.0537 | −0.0660 | 12.830 | −0.0702 |

Mode | N/A | 16.588 | N/A | N/A | 12.709 | N/A |

Sample Variance | 0.9688 | 0.7227 | 0.7156 | 0.8492 | 0.8975 | 0.6484 |

Stand. Deviation | 0.8178 | 0.8501 | 0.8460 | 0.9215 | 0.9473 | 0.8053 |

Minimum | −3.5600 | 11.617 | −3.5560 | −4.0362 | 8.2808 | −3.8895 |

Maximum | 4.9542 | 18.185 | 4.9542 | 4.6061 | 14.560 | 4.2371 |

Range | 9.5142 | 6.5680 | 8.5142 | 8.6423 | 6.2794 | 8.1266 |

Skewness | 2.3966 | −2.1680 | 1.0276 | 1.5001 | −1.9954 | 0.6335 |

Kurtosis | 5.1593 | 5.3253 | 6.1547 | 7.7933 | 5.2876 | 6.0679 |

Parameter Estimates | Series A | Series B | |
---|---|---|---|

Mean Value | $\stackrel{~}{\mu}$ | 16.832 | 12.672 |

$\widehat{\mu}$ | 17.004 | 12.587 | |

Sample Correlation | ${\widehat{\rho}}_{X}\left(1\right)$ | −0.1911 | −0.3948 |

Threshold Parameter | ${\stackrel{~}{b}}_{c}$ | 0.2362 | 0.6523 |

${\widehat{b}}_{c}$ | 0.3766 | 0.5546 | |

Critical Value | $\stackrel{~}{c}$ | 0.0196 | 0.2868 |

$\widehat{c}$ | 0.0459 | 0.1487 | |

Scale Parameter | $\stackrel{~}{\lambda}$ | 0.5201 | 0.5069 |

$\widehat{\lambda}$ | 0.4520 | 0.5113 |

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## Share and Cite

**MDPI and ACS Style**

Stojanović, V.S.; Bakouch, H.S.; Ljajko, E.; Božović, I.
Laplacian Split-BREAK Process with Application in Dynamic Analysis of the World Oil and Gas Market. *Axioms* **2023**, *12*, 622.
https://doi.org/10.3390/axioms12070622

**AMA Style**

Stojanović VS, Bakouch HS, Ljajko E, Božović I.
Laplacian Split-BREAK Process with Application in Dynamic Analysis of the World Oil and Gas Market. *Axioms*. 2023; 12(7):622.
https://doi.org/10.3390/axioms12070622

**Chicago/Turabian Style**

Stojanović, Vladica S., Hassan S. Bakouch, Eugen Ljajko, and Ivan Božović.
2023. "Laplacian Split-BREAK Process with Application in Dynamic Analysis of the World Oil and Gas Market" *Axioms* 12, no. 7: 622.
https://doi.org/10.3390/axioms12070622