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Applied Mathematics & Information Sciences

Author Country (or Countries)

Ghana

Abstract

Although crude oil is a major source of energy throughout the world, unexpected jumps in its price cause remarkable economic events globally. Countries such as Nigeria and Venezuela, whose major foreign exchange earner is crude oil. have experienced economic recession because of the recent huge drop in its price. Thus, understanding the dynamics of its price has become necessary. Moreover, obtaining a model that properly describes crude oil spot price movement is useful for strategic investment planning, managing market risks and even for short time forecasting. Crude oil price exhibits jumps, so Gaussian models will fail to capture the real market events. In this paper, a Le ́vy model of the jump-diffusion type is used to model crude oil price and its fit is confirmed using empirical spot price data.

Digital Object Identifier (DOI)

http://dx.doi.org/10.18576/amis/130617

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