Volatility of Oil Prices

Author/Editor:

Peter Wickham

Publication Date:

August 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines the behavior of crude oil prices since 1980, and in particular the volatility of these prices. The empirical analysis covers “spot” prices for one of the key internationally traded crudes, namely Dated Brent Blend. A GARCH (generalized autoregressive conditional heteroscedastic) model, which allows the conditional variance to be time-variant, is estimated for the period which includes the oil price slump of 1986 and the surge in prices in 1990 as a result of the Iraqi invasion of Kuwait. The paper also discusses the growth of futures and derivative markets and the dynamic links between spot and futures markets.

Series:

Working Paper No. 1996/082

Subject:

Commodities Financial institutions Financial markets Futures Futures markets Oil Oil prices Price controls Prices

English

Publication Date:

August 1, 1996

ISBN/ISSN:

9781451954722/1018-5941

Stock No:

WPIEA0821996

Pages:

20

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