Abstract
The sustainable energy consumption in northeast Asia has a huge impact on regional stability and economic growth, which gives price volatility research in the energy market both theoretical value and practical application. We select China’s fuel oil futures market as a research subject and use recurrence interval analysis to investigate the price volatility pattern in different thresholds. We utilize the stretched exponential function to fit the pattern of the recurrence intervals of price fluctuations and find that the probability density functions of the recurrence intervals in different thresholds do not show the scaling behavior. Then the conditional probability density function and detrended fluctuation analysis prove that there is short-term and long-term correlation. Last, we use a hazard function to introduce the recurrence intervals into the (value at risk) VaR calculation and establish a functional relationship between the mean recurrence interval and the threshold. Following this result, we also shed light on policy discussion for hedgers and government.
Highlights
With regard to sustainable development in northeast Asia, the utilization and depletion of energy is always a problem for each country [1]
The results show that the lead–lag relationship between West Texas Intermediate (WTI) futures and New York Mercantile Exchange (NYMEX) crude oil spot will change with time across both regimes
recurrence interval analysis (RIA) was used to evaluate the risk for fuel oil futures, which provides a relatively accurate risk estimation and constructs a relationship between loss possibility and volatility scale
Summary
With regard to sustainable development in northeast Asia, the utilization and depletion of energy is always a problem for each country [1]. For a long time, the fuel market in a country like China has mainly been built by agreement pricing, which lacks a buffer mechanism to maintain the endogenous stability of this system [3,4]. The long-term contract pricing of these agreements will make China and entire northeast Asia suffer losses in the international fuel price fluctuations. In 2004, China followed the example of West Texas Intermediate (WTI) and Brent and set up its energy futures market [5], hoping to stabilize the market price and futures expectation of domestic primary fuel consumers and to achieve a more balanced and sustainable development
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
