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War and peace: recovering the market's probability distribution of crude oil futures prices during the Gulf crisis

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Author Info

  • William R. Melick
  • Charles P. Thomas

Abstract

This paper investigates the market's expectations for oil prices during the Persian Gulf crisis. To do so a general method for using options markets to recover the implied distribution for futures prices is developed. The method applies to a wide class of distributions. In particular, it is not limited to those distributions arising from diffusion or jump-diffusion processes.

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File URL: http://www.federalreserve.gov/pubs/ifdp/1992/437/default.htm
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File URL: http://www.federalreserve.gov/pubs/ifdp/1992/437/ifdp437.pdf
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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 437.

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Date of creation: 1992
Date of revision:
Handle: RePEc:fip:fedgif:437

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Related research

Keywords: Power resources - Prices ; Persian Gulf War; 1991;

References

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  1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  2. Breusch, Trevor S, 1986. "Hypothesis Testing in Unidentified Models," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 635-51, August.
  3. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
  4. Barone-Adesi, Giovanni & Whaley, Robert E, 1987. " Efficient Analytic Approximation of American Option Values," Journal of Finance, American Finance Association, vol. 42(2), pages 301-20, June.
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Cited by:
  1. William R. Melick & Charles P. Thomas, 1996. "Using options prices to infer PDF'S for asset prices: an application to oil prices during the Gulf crisis," International Finance Discussion Papers 541, Board of Governors of the Federal Reserve System (U.S.).
  2. Michael P. Leahy & Charles P. Thomas, 1996. "The sovereignty option: the Quebec referendum and market views on the Canadian dollar," International Finance Discussion Papers 555, Board of Governors of the Federal Reserve System (U.S.).

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