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Analyzing Oil Futures with a Dynamic Nelson‐Siegel Model
Author(s) -
GrØnborg Niels S.,
Lunde Asger
Publication year - 2016
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21713
Subject(s) - futures contract , econometrics , economics , sample (material) , outcome (game theory) , class (philosophy) , term (time) , financial economics , mathematical economics , computer science , artificial intelligence , physics , thermodynamics , quantum mechanics
The dynamic Nelson–Siegel model is used to model the term structure of futures contracts on oil and obtain forecasts of prices of these contracts. Three factors are extracted and modelled in a very flexible framework. The outcome of this exercise is a class of models which describes the observed prices of futures contracts well and performs better than conventional benchmarks in realistic real‐time out‐of‐sample exercises. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:153–173, 2016