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An empirical estimation for mean-reverting coal prices with long memory

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  • Sun, Qi
  • Xu, Weijun
  • Xiao, Weilin
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    Abstract

    In this paper we discuss the calibration issues of power models built on mean-reverting processes combined with long memory. The unknown parameters of fractional mean-reversion processes are estimated by a hybrid estimation method, which is built upon the marriage of the quadratic variation and the least squares. We perform a simulation study to test the efficiency of these estimators and to compare with the approach proposed by Høg (1999). Moreover, we apply our estimation procedure to some sample series of Chinese coal spot prices in real life situations. These results support the use of fractional mean-reversion processes in modeling Chinese coal prices.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 33 (2013)
    Issue (Month): C ()
    Pages: 174-181

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    Handle: RePEc:eee:ecmode:v:33:y:2013:i:c:p:174-181

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Energy model; Least squares estimation; Quadratic variations; Fractional mean-reversion processes; Monte Carlo simulation;

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    Cited by:
    1. Zhang, Pu & Xiao, Wei-lin & Zhang, Xi-li & Niu, Pan-qiang, 2014. "Parameter identification for fractional Ornstein–Uhlenbeck processes based on discrete observation," Economic Modelling, Elsevier, vol. 36(C), pages 198-203.

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