{
  "title": "Recent Dynamics of Crude Oil Prices",
  "publication": "IMF Working Papers, December 1, 2006",
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  "summary": "Crude oil prices have been on a run-up spree in recent years. Their dynamics were characterized by high volatility, high intensity jumps, and strong upward drift, indicating that oil markets were constantly out-of-equilibrium.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- Crude oil prices have been on a run-up spree in recent years.\n- Price dynamics were characterized by:\n  - high volatility,\n  - high intensity jumps,\n  - strong upward drift.\n- These features indicate that oil markets were constantly out-of-equilibrium.\n- Pressure on oil prices is viewed mainly as a result of:\n  - rigid crude oil supply,\n  - an expanding world demand for crude oil.\n- A change in the oil price process parameters would require a change in the underlying fundamentals."
    },
    {
      "heading": "Market expectations and option-implied information",
      "content": "- Market expectations were extracted from call and put option prices.\n- Options-implied expectations anticipated:\n  - no change, in the short term, in the underlying fundamentals;\n  - continued volatility and jumpy behavior of oil prices;\n  - higher probabilities that oil prices would rise, rather than fall, above the expected mean."
    },
    {
      "heading": "Explanation and modeling approach",
      "content": "- The paper provides an explanation of the oil price process in terms of underlying fundamentals of oil markets and the world economy.\n- Modeling and analytical elements highlighted in keywords include:\n  - Asset prices, Characteristic function, cumulants, drift,\n  - Fourier inversion, Fourier transform,\n  - Futures, futures price,\n  - inelasticities of oil demand and supply, jump-diffusion,\n  - kurtosis, modeling asset price, oil price density, oil price dynamics,\n  - option pricing, option value, Options, price density,\n  - return process, skewness, state price density, variance-gamma distribution, volatility."
    },
    {
      "heading": "Implications and policy considerations",
      "content": "- Because oil price process parameters are driven by supply and demand fundamentals, policy-relevant implications include:\n  - to alter the oil price process meaningfully, interventions or structural changes must affect crude oil supply rigidity or global demand expansion;\n  - in the short term, reliance on market option prices suggests limited expectations of fundamental change and an elevated risk of upward price moves and jumps.\n\n---\n\n Content in this bundle\n\n- Recent Dynamics of Crude Oil Prices; Noureddine Krichene; IMF Working Paper 06/299; December 1, 2006\n  - Recent Dynamics of Crude Oil Prices; Noureddine Krichene; IMF Working Paper 06/299; December 1, 2006 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Recent Dynamics of Crude Oil Prices; Noureddine Krichene; IMF Working Paper 06/299; December 1, 2006 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/recent-dynamics-of-crude-oil-prices-20195"
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    "Authors: Noureddine Krichene",
    "Published: December 1, 2006",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451865592.001",
    "Crude oil prices have been on a run-up spree in recent years.",
    "Price dynamics were characterized by:",
    "These features indicate that oil markets were constantly out-of-equilibrium.",
    "Pressure on oil prices is viewed mainly as a result of:",
    "A change in the oil price process parameters would require a change in the underlying fundamentals.",
    "Market expectations were extracted from call and put option prices.",
    "Options-implied expectations anticipated:",
    "The paper provides an explanation of the oil price process in terms of underlying fundamentals of oil markets and the world economy.",
    "Modeling and analytical elements highlighted in keywords include:",
    "Because oil price process parameters are driven by supply and demand fundamentals, policy-relevant implications include:",
    "**Recent Dynamics of Crude Oil Prices; Noureddine Krichene; IMF Working Paper 06/299; December 1, 2006**"
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