A Lorentz Transition Distribution Model for High Frequency Crude Oil Futures

Chang Liu, Chuo Chang, Yinglan Zhao

2022

Abstract

With the deepening of the financialization of the oil market, the importance of the oil futures market is highlighted. The highly volatile crude oil future market inevitably has major influence on financial markets, national economy and even national security. Therefore, modelling accurately the volatility of crude oil futures prices has important theoretical and practical significance for investors and for preventing energy market risks. In this paper, we study the distribution of high-frequency crude oil futures price changes. Many empirical studies have shown that the distribution of price changes in financial market has fatter tail than lognormal distribution. Thus, we build a model using both the transition distribution and the Lorentz stable distribution to describe the characteristics of oil future market. Employing the Fokker-Planck equation, we find the explicit formalism of the distribution of oil future price changes. Using empirical data from China’s future market, we have proved the consistency of our theoretical model with the real market.

Paper Citation

in Harvard Style

Liu C., Chang C. and Zhao Y. (2022). A Lorentz Transition Distribution Model for High Frequency Crude Oil Futures. In Proceedings of the 3rd International Symposium on Automation, Information and Computing - Volume 1: ISAIC; ISBN 978-989-758-622-4, SciTePress, pages 278-285. DOI: 10.5220/0011922000003612

in Bibtex Style

@conference{isaic22,
author={Chang Liu and Chuo Chang and Yinglan Zhao},
title={A Lorentz Transition Distribution Model for High Frequency Crude Oil Futures},
booktitle={Proceedings of the 3rd International Symposium on Automation, Information and Computing - Volume 1: ISAIC},
year={2022},
pages={278-285},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0011922000003612},
isbn={978-989-758-622-4},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 3rd International Symposium on Automation, Information and Computing - Volume 1: ISAIC
TI - A Lorentz Transition Distribution Model for High Frequency Crude Oil Futures
SN - 978-989-758-622-4
AU - Liu C.
AU - Chang C.
AU - Zhao Y.
PY - 2022
SP - 278
EP - 285
DO - 10.5220/0011922000003612
PB - SciTePress