Modeling Crude Oil and Refined Petroleum Product Spreads: An Alternative Tool for Risk Quantification
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1 juin 2021
- handle: 10670/1.ihhp3t
Ce document est lié à :
10.24275/etypuam/ne/542021/lopez
info:eu-repo/semantics/openAccess
Mots-clés
Commodity prices energy markets risk management Markov chains C02 C14 C15 N7 P28 P34Citer ce document
Antonio López Velarde Loera et al., « Modeling Crude Oil and Refined Petroleum Product Spreads: An Alternative Tool for Risk Quantification », Economía: teoría y práctica, ID : 10670/1.ihhp3t
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Résumé
In this paper, an alternative approach to modeling and simulating spreads between crude oil and petro-leum products is proposed. The aim is to provide a model that can be used as a risk management tool for risk quantification purposes. In particular, the relationship between the crude oil and gasoline spread and crude oil price was assessed. The methodology proposed is based on first-order Markov chain simulations. We demonstrate that although the proposed model is based on the empirical behavior of energy commodity spreads, this risk management tool reduces misquantifications of the risk generated by the price differentials of particular concern to this study and that this modeling alternative can help diminish model risk with respect to other existing models.