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New Economic Modelling Study Findings Have Been Reported by Researchers at East China University of Science and Technology

February 21, 2014



By a News Reporter-Staff News Editor at Economics Week -- Current study results on Economic Modelling have been published. According to news reporting out of Shanghai, People's Republic of China, by VerticalNews editors, research stated, "Energy markets and the associated energy futures markets play a crucial role in global economies. It is of great theoretical and practical significance to gain a deeper understanding of extreme value statistics of the volatility of energy futures traded on the New York Mercantile Exchange (NYMEX)."

Our news journalists obtained a quote from the research from the East China University of Science and Technology, "We investigate the statistical properties of the recurrence intervals of daily volatility time series of four NYMEX energy futures, which are defined as the waiting times tau between consecutive volatilities exceeding a given threshold q. We find that the recurrence intervals are distributed as a stretched exponential P-q(tau)similar to e((a tau)-gamma), where the exponent gamma decreases with increasing q, and there is no scaling behavior in the distributions for different thresholds q after the recurrence intervals are scaled with the mean recurrence interval (tau) over bar. These findings are significant under the Kolmogorov-Smimov test and the Cramer-von Mises test. We show that the empirical estimations are in nice agreement with the numerical integration results for the occurrence probability W-q(Delta t vertical bar t) of a next event above the threshold q within a (short) time interval after an elapsed time t from the last event above q. We also investigate the memory effects of the recurrence intervals. It is found that the conditional distributions of large and small recurrence intervals differ from each other and the conditional mean of the recurrence intervals scale as a power law of the preceding interval (tau) over bar(tau(0))/(tau) over bar similar to(tau(0)/(tau) over bar)(beta), indicating that the recurrence intervals have short-term correlations. Detrended fluctuation analysis and detrending moving average analysis further uncover that the recurrence intervals possess long-term correlations. We confirm that the 'clustering' of the volatility recurrence intervals is caused by the long-term correlations well known to be present in the volatility."

According to the news editors, the research concluded: "Our findings shed new lights on the behavior of large volatilities and have potential implications in risk management of energy futures."

For more information on this research see: Extreme value statistics and recurrence intervals of NYMEX energy futures volatility. Economic Modelling, 2014;36():8-17. Economic Modelling can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Economic Modelling - www.elsevier.com/wps/product/cws_home/30411)

Our news journalists report that additional information may be obtained by contacting W.J. Xie, E. China University of Science & Technology, Key Lab Coal Gasificat & Energy Chem Engn MOE, Shanghai 200237, People's Republic of China. Additional authors for this research include Z.Q. Jiang and W.X. Zhou.

Keywords for this news article include: Asia, Shanghai, Economic Modelling, People's Republic of China

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Source: Economics Week


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