Study on Distribution of Oil Price Return Based on NIG Distribution

Abstract

The application of Normal Inverse Gaussian (NIG) distribution to the oil price return distribution fitting is explored. The statistical properties of oil price return were studied and the normality test was performed. The result shows that the return distribution is characterized by asymmetry, leptokurtosis and heavy tails. The NIG distribution was introduced to calibrate the return dataset to find the fitness of NIG model. NIG distribution, which is able to capture the skewness and excess kurtosis, provides not only an excellent fit in the center of the return distribution, but also in the tails.