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dc.contributor.advisorChaput, John Scott
dc.contributor.authorBerlova, Ekaterina
dc.date.available2011-07-26T23:27:27Z
dc.date.copyright2011
dc.identifier.citationBerlova, E. (2011). Informational content of the term structure of forward implied volatility in oil and gas futures market (Thesis, Master of Business). University of Otago. Retrieved from http://hdl.handle.net/10523/1785en
dc.identifier.urihttp://hdl.handle.net/10523/1785
dc.description.abstractThis paper is the first to investigate the informational content of model-free forward implied volatility (MF FIV) in energy markets, as previous studies mainly concentrated on model-dependent volatility estimates and used data on financial assets rather than on commodities. Using daily prices of crude oil and natural gas futures and options, we try to determine whether MF FIV provides unbiased forecasts of future IV and compare the performance of MF FIV with the performance of three other volatility forecast measures, such as model-dependent forward implied volatility (MD FIV) estimated using Black’s (1976) model, GARCH (1,1) and historical volatility (HV) based on a 250-day moving average. We find that in the crude oil sample MF FIV performs best in providing unbiased forecasts of IV among four volatility forecasting measures, although only at the nearby intervals. In the natural gas sample MF FIV seems to provide the best forecasts of MF IV, and GARCH takes second place, followed by MD FIV and HV. At forecasting MD IV, MD FIV is the most successful; GARCH is the second best performer, followed by MF FIV and HV. GARCH clearly outperforms HV in most of the tests, indicating that information about the 250 past daily volatility values contained in HV estimates does not add explanatory power. We also find support for informational efficiency of energy markets, as volatilities are difficult to predict far in the future. Hence, information contained in energy prices can be considered reliable, and options on energy products can serve as good hedging instruments to all market participants.
dc.format.mimetypeapplication/pdf
dc.language.isoen
dc.publisherUniversity of Otago
dc.rightsAll items in OUR Archive are provided for private study and research purposes and are protected by copyright with all rights reserved unless otherwise indicated.
dc.subjectTerm Structure of Implied Volatility
dc.subjectModel Free Implied Volatility
dc.subjectFutures
dc.subjectOil and Gas
dc.subjectGARCH
dc.subjectVolatility Forecasting
dc.titleInformational content of the term structure of forward implied volatility in oil and gas futures market
dc.typeThesis
dc.date.updated2011-07-26T22:46:46Z
thesis.degree.disciplineAccountancy and Finance
thesis.degree.nameMaster of Business
thesis.degree.grantorUniversity of Otago
thesis.degree.levelMasters Theses
otago.openaccessOpen
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