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Spot Price Modelling of Industrial Metals – An heterogeneous agent based model for Copper

Author

Listed:
  • Helyette Geman

    (Department of Economics, Mathematics & Statistics, Birkbeck)

  • Matthias Scheiber

    (Department of Economics, Mathematics & Statistics, Birkbeck)

Abstract

We will show in this paper the role of inventories in explaining copper price volatility. Using a three factor model we derive a fundamental long-term value for copper. Second, we emphasis the significance of this fundamental long-term value by considering an agent based model approach in which mean-reversion focused fundamental investors trade with chartists who follow price trends. We show that fundamental investors take increasing positions in copper when the spot price of copper deviated from its fundamental value (i.e. the fundamental value is higher than the spot price) and chartists loose relative significance.

Suggested Citation

  • Helyette Geman & Matthias Scheiber, 2014. "Spot Price Modelling of Industrial Metals – An heterogeneous agent based model for Copper," Birkbeck Working Papers in Economics and Finance 1404, Birkbeck, Department of Economics, Mathematics & Statistics.
    • Handle: RePEc:bbk:bbkefp:1404
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    File URL: https://eprints.bbk.ac.uk/id/eprint/15283
    File Function: First version, 2014
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    References listed on IDEAS

    as
    1. François Longin & Bruno Solnik, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, April.
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    Cited by:

    1. Ciner, Cetin & Lucey, Brian & Yarovaya, Larisa, 2020. "Spillovers, integration and causality in LME non-ferrous metal markets," Journal of Commodity Markets, Elsevier, vol. 17(C).

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    More about this item

    Keywords

    Heterogeneous agent based modelling; copper spot price modelling; 3 factor stochastic volatility model; Runge Kutta; Kalman Filter.;
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