In this paper we study the stochastic behavior of the prices and volatilities of a sample of six of the most important commodity markets and we compare these properties with those of the equity market. we observe a substantial degree of heterogeneity in the behavior of the series. Our findings show that it is inappropriate to treat different kinds of commodities as a single asset class as is frequently the case in the academic literature and in the industry. We demonstrate that commodities can be a useful diversifier of equity volatility as well as equity returns. Options pricing and hedging applications exemplify the economic impacts of the differences across commodities and between model specifications. © 2013 Copyright Taylor and Francis Group, LLC.
CITATION STYLE
Brooks, C., & Prokopczuk, M. (2013). The dynamics of commodity prices. Quantitative Finance, 13(4), 527–542. https://doi.org/10.1080/14697688.2013.769689
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