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Bayesian Analysis of a Comprehensive Model for Agricultural Futures

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  • Schmitz, Adam
  • ZhiguangWang,

Abstract

Agricultural futures price features stochastic volatility, seasonal spot price volatility, and stochastic cost-of-carry. We propose a single comprehensive model that inludes all these features. We apply the proposed model to analyze the corn futures market from January 3rd, 1989, to December 31st, 2008. We conduct parameter estimation using Markov chain Monte Carlo (MCMC) with a novel dynamic tuning scheme. We also employ a parallel MCMC scheme for state variable estimation. Parameter estimates and model errors indicate the comprehensive model to be e_x000B_ective for modeling corn futures.

Suggested Citation

  • Schmitz, Adam & ZhiguangWang,, 2014. "Bayesian Analysis of a Comprehensive Model for Agricultural Futures," 2014 Conference, April 21-22, 2014, St. Louis, Missouri 285809, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:n13414:285809
    DOI: 10.22004/ag.econ.285809
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    References listed on IDEAS

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    2. Sergio H. Lence & Hervé G. Ott & Chad E. Hart, 2013. "Long‐term Futures Curves and Seasonal Structures of Wheat in the European Union and the United States," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 33(12), pages 1118-1142, December.
    3. Hélyette Geman & Vu-Nhat Nguyen, 2005. "Soybean Inventory and Forward Curve Dynamics," Management Science, INFORMS, vol. 51(7), pages 1076-1091, July.
    4. Helyette Geman & V. Nguyen, 2005. "Soybeans Inventory and Forward Curve Dynamics," Post-Print halshs-00144292, HAL.
    5. repec:dau:papers:123456789/1937 is not listed on IDEAS
    6. Jin, Na & Lence, Sergio & Hart, Chad, 2010. "Price Mean Reversion and Seasonality in Agricultural Commodity Markets," 2010 Conference, April 19-20, 2010, St. Louis, Missouri 285317, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    7. Arismendi, Juan C. & Back, Janis & Prokopczuk, Marcel & Paschke, Raphael & Rudolf, Markus, 2016. "Seasonal Stochastic Volatility: Implications for the pricing of commodity options," Journal of Banking & Finance, Elsevier, vol. 66(C), pages 53-65.
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