Download or read book Modeling and Estimation of Commodity Price Dynamics written by Claudio Cina and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodity prices exhibit different characteristics than traditional asset classes. This paper provides an in-depth analysis of the corresponding price dynamics transferring a time series approach originally proposed by Chan et al. (1992) to the field of commodities. One unrestricted and eight restricted stochastic models are assessed and empirically tested. Besides an incorporated mean reversion feature, the model also allows the volatility to change with the underlying price. Daily data of 22 commodities out of different sectors are taken into consideration. Generic front month future contracts form July 24, 1997 to January 6, 2011 were used for the analysis (3511 observations), further splitting the time series into a bull (2002 - 2006) and bear market regime (2007 - 2008). Generalized Method of Moments (GMM) are applied to estimate the unknown parameters and a &u9672 goodness-of-fit test is run to evaluate which models capture best the dynamics of the corresponding commodities for different market regimes. In line with Geman and Shih (2009) we find that the CEV exponent &u947 plays a very important role in the modeling of commodity price dynamics whereas the mean reversion effect disappears for most of the commodities for the different periods under analysis.