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Natural Gas markets:How Sensitive to Crude Oil Price Changes?

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  • Onour, Ibrahim

Abstract

This paper investigates sensitivity of U.S. natural gas price to crude oil price changes, using time-varying coefficient models. Identification of the range of variation of the sensitivity of natural gas price to oil price change allows more accurate assessment of upper and minimum risk levels that can be utilized in pricing natural gas derivatives such as gas futures and option contracts, and gas storage facility contracts.

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File URL: http://mpra.ub.uni-muenchen.de/14937/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14937.

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Date of creation: 25 Apr 2009
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Handle: RePEc:pra:mprapa:14937

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Keywords: Natural gas; Sensitivity; GARCH; Volatility; Skewness; Kurtosis;

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  1. Sharpe, William F., 1967. "Portfolio Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 2(02), pages 76-84, June.
  2. Serletis, Apostolos & Rangel-Ruiz, Ricardo, 2004. "Testing for common features in North American energy markets," Energy Economics, Elsevier, Elsevier, vol. 26(3), pages 401-414, May.
  3. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(1), pages 134-44, January.
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  5. Robert F. Engle & Sharon Kozicki, 1990. "Testing For Common Features," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0091, National Bureau of Economic Research, Inc.
  6. Harvey, Campbell R. & Siddique, Akhtar, 1999. "Autoregressive Conditional Skewness," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 34(04), pages 465-487, December.
  7. Andrew J. Patton, 2004. "On the Out-of-Sample Importance of Skewness and Asymmetric Dependence for Asset Allocation," Journal of Financial Econometrics, Society for Financial Econometrics, Society for Financial Econometrics, vol. 2(1), pages 130-168.
  8. Robert W. Faff & David Hillier & Joseph Hillier, 2000. "Time Varying Beta Risk: An Analysis of Alternative Modelling Techniques," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 27(5&6), pages 523-554.
  9. Frank Asche & Petter Osmundsen & Maria Sandsmark, 2006. "The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 2), pages 27-40.
  10. Stephen P. A. Brown & Mine K. Yucel, 2008. "What Drives Natural Gas Prices?," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 2), pages 45-60.
  11. Jun Yu, 2002. "Forecasting volatility in the New Zealand stock market," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(3), pages 193-202.
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Cited by:
  1. Cornille, David & Meyler, Aidan, 2010. "The behaviour of consumer gas prices in an environment of high and volatile oil prices," MPRA Paper, University Library of Munich, Germany 39099, University Library of Munich, Germany.

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