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Title: Filtering and forecasting commodity futures prices under an HMM framework
Authors: Date, P
Mamon, R
Tenyakov, A
Keywords: Change of measure;Markov chain;Multivariate HMM filtering;Oil future prices
Issue Date: 2013
Publisher: Elsevier
Citation: Energy Economics, 40 pp. 1001 - 1013, 2013
Abstract: We propose a model for the evolution of arbitrage-free futures prices under a regime-switching framework. The estimation of model parameters is carried out using the hidden Markov filtering algorithms. Comprehensive numerical experiments on real financial market data are provided to illustrate the effectiveness of our algorithm. In particular, the model is calibrated with data from heating oil futures and its forecasting performance as well as statistical validity is investigated. The proposed model is parsimonious, self-calibrating and can be very useful in predicting futures prices. © 2013 Elsevier B.V.
ISSN: 0140-9883
Appears in Collections:Dept of Mathematics Research Papers

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