Two Essays on Crude Oil Futures and Options Markets
| dc.contributor.advisor | Jacobs, Kris | |
| dc.contributor.committeeMember | Pirrong, Craig | |
| dc.contributor.committeeMember | Doshi, Hitesh | |
| dc.contributor.committeeMember | Papell, David H. | |
| dc.creator | Li, Bingxin 1977- | |
| dc.date.accessioned | 2018-03-01T23:06:08Z | |
| dc.date.available | 2018-03-01T23:06:08Z | |
| dc.date.created | December 2013 | |
| dc.date.issued | 2013-12 | |
| dc.date.submitted | December 2013 | |
| dc.date.updated | 2018-03-01T23:06:08Z | |
| dc.description.abstract | This dissertation consists of two essays on crude oil futures and options markets. The first essay investigates whether aggregate risk aversion and risk premiums in the crude oil market co-vary with the level of speculation. Using crude oil futures and option data, I estimate aggregate risk aversion in the crude oil market and find that it is signi ficantly lower after 2002, when speculative activity started to increase. Using speculation index as a state variable, risk premiums implied by the state-dependent risk aversion estimates confi rm the negative correlation between speculative activity and risk premiums, and indicate that risk premiums in the crude oil market are on average lower and more volatile after 2002. These findings suggest that index-fund investors who demand commodity futures for the purpose of portfolio diversi fication are willing to accept lower compensation for their positions. Estimated state-dependent risk premiums have substantial predictive power for subsequent futures returns and outperform commonly used predictors. The second essay exams the economic importance of jumps, jump risk premiums, and dynamic jump intensities in crude oil futures and options markets. Existing pricing models for crude oil options are computationally intensive due to the presence of latent state variables. Using a panel data of crude oil futures and options, I implement a class of computationally e fficient discrete-time jump models. I find that jumps account for about half of the total variance in crude oil futures and options prices, and a substantial part of the risk premiums is due to jumps. Jumps are large and rare events in crude oil futures and options markets. The main role of jumps and jump risk premiums in crude oil futures and options markets is to capture excess kurtosis in the data. These findings suggest that it is critical to include jumps in pricing models for crude oil futures and options, and there is strong evidence in favor of time-varying jump intensities. | |
| dc.description.department | Finance, Department of | |
| dc.format.digitalOrigin | born digital | |
| dc.format.mimetype | application/pdf | |
| dc.identifier.uri | http://hdl.handle.net/10657/2726 | |
| dc.language.iso | eng | |
| dc.rights | The author of this work is the copyright owner. UH Libraries and the Texas Digital Library have their permission to store and provide access to this work. Further transmission, reproduction, or presentation of this work is prohibited except with permission of the author(s). | |
| dc.subject | Crude oil | |
| dc.subject | Futures | |
| dc.subject | Options | |
| dc.subject | Speculation | |
| dc.subject | Risk Aversion | |
| dc.subject | Risk Premium | |
| dc.subject | Jumps | |
| dc.title | Two Essays on Crude Oil Futures and Options Markets | |
| dc.type.dcmi | Text | |
| dc.type.genre | Thesis | |
| thesis.degree.college | C. T. Bauer College of Business | |
| thesis.degree.department | Finance, Department of | |
| thesis.degree.discipline | Finance | |
| thesis.degree.grantor | University of Houston | |
| thesis.degree.level | Doctoral | |
| thesis.degree.name | Doctor of Philosophy |