A Volatility Method of Crude Oil Dynamics: The Role of Market and Commodity Volatilities in Determining Equilibrium Prices

A Volatility Method of Crude Oil Dynamics: The Role of Market and Commodity Volatilities in Determining Equilibrium Prices | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article A Volatility Method of Crude Oil Dynamics: The Role of Market and Commodity Volatilities in Determining Equilibrium Prices BOUGHABI Houssam This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6547278/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper introduces a novel volatility-driven method for pricing crude oil, focusing on the relationship between stock market and commodity price volatilities. By modeling the spot price dynamics as a linear combination of market and commodity volatilities, the study establishes equilibrium conditions in the financial system. Through a detailed analysis of the dynamics of $A(t,T)$ and $B(t,T)$, we show how these functions trace similar paths, reflecting the equilibrium between oil market volatility and underlying commodity risk. Our results suggest that the relationship between financial market volatilities and real economic forces provides new insights into pricing mechanisms. JEL Classification. G13, C22, Q41 Financial Mathematics Macroeconomics Econometrics Volatility Models Financial Equilibrium Long Memory Commodity Risk Full Text Additional Declarations The authors declare no competing interests. Supplementary Files thecode.docx Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. 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