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Information Journal Paper

Title

EXAMINATION OF CRUDE OIL PRICES RELATIONSHIPS IN SPOT AND FUTURES MARKETS BASED ON THE BASIS RISK AND CRUDE OIL INVENTORY: USING GARCH MODEL

Pages

  75-102

Abstract

 The crude oil is both a commodity and a financial asset. As there are many factors affecting the crude oil spot and futures markets, the analysis of the relationship between major factors of these markets is complicated. The main objective of this paper is to investigate the relationship between the price of crude oil in spot and futures market and identify the effect of the crude oil INVENTORY and the interest-adjusted basis risk on these price changes. The monthly data of WTI spot and FUTURES PRICEs, WTI crude oil INVENTORY and interest-adjusted basis risk are from EIA (Energy Information Administration) database. The data period is from January 1986 to December 2010. Due to the unpredictable volatilities and uncertainties in variables, the GARCH error process models are used. Empirical results show that there is a positive, strong and significant relationship between the spot crude oil price changes and FUTURES PRICEs. Additionally, the basis risk changes can affect the spot and futures crude oil prices up to three lags. Also, crude oil INVENTORY changes have a negative effect on the spot crude oil price changes with one lag.

Cites

References

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APA: Copy

FARIDZAD, ALI, & MOHAJERI, PARISA. (2011). EXAMINATION OF CRUDE OIL PRICES RELATIONSHIPS IN SPOT AND FUTURES MARKETS BASED ON THE BASIS RISK AND CRUDE OIL INVENTORY: USING GARCH MODEL. JOURNAL OF ECONOMIC MODELING RESEARCH, -(5), 75-102. SID. https://sid.ir/paper/208875/en

Vancouver: Copy

FARIDZAD ALI, MOHAJERI PARISA. EXAMINATION OF CRUDE OIL PRICES RELATIONSHIPS IN SPOT AND FUTURES MARKETS BASED ON THE BASIS RISK AND CRUDE OIL INVENTORY: USING GARCH MODEL. JOURNAL OF ECONOMIC MODELING RESEARCH[Internet]. 2011;-(5):75-102. Available from: https://sid.ir/paper/208875/en

IEEE: Copy

ALI FARIDZAD, and PARISA MOHAJERI, “EXAMINATION OF CRUDE OIL PRICES RELATIONSHIPS IN SPOT AND FUTURES MARKETS BASED ON THE BASIS RISK AND CRUDE OIL INVENTORY: USING GARCH MODEL,” JOURNAL OF ECONOMIC MODELING RESEARCH, vol. -, no. 5, pp. 75–102, 2011, [Online]. Available: https://sid.ir/paper/208875/en

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