On the tail risk premium in the oil market / by Reinhard Ellwanger. : FB3-5/2017-46E-PDF
“This paper shows that changes in market participants’ fear of rare events implied by crude oil options contribute to oil price volatility and oil return predictability. Using 25 years of historical data, we document economically large tail risk premia that vary substantially over time and significantly forecast crude oil futures and spot returns. Oil futures prices increase (decrease) in the presence of upside (downside) fears in order to allow for smaller (larger) returns thereafter. This increase (decrease) is amplified for the spot price because of time varying-benefits from holding physical oil inventories that work in the same direction. We also provide support for the view that that time variation in the relative importance of oil demand and supply shocks is an important determinant of oil price fluctuations and their interaction with aggregate outcomes"--Abstract, p. ii.
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publications.gc.ca/pub?id=9.847466&sl=1
| Ministère/Organisme | Bank of Canada. |
|---|---|
| Titre | On the tail risk premium in the oil market / by Reinhard Ellwanger. |
| Titre de la série | Bank of Canada staff working paper, 1701-9397 ; 2017-46 |
| Type de publication | Série - Voir l'enregistrement principal |
| Langue | [Anglais] |
| Format | Électronique |
| Document électronique | |
| Note(s) | "November 2017." Includes bibliographical references (26-28). Includes abstract in French. |
| Information sur la publication | [Ottawa] : Bank of Canada, 2017. |
| Auteur / Contributeur | Ellwanger, Reinhard. |
| Description | ii, 36 p. : charts |
| Numéro de catalogue |
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| Descripteurs | Petroleum Prices Stock markets Statistical analysis |
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