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Futures markets are a potentially valuable source of information about market expectations. Exploiting this information has proved difficult in practice, because the presence of a time-varying risk premium often renders the futures price a poor measure of the market expectation of the price of the underlying asset. Even though the expectation in principle may be recovered by adjusting the futures price by the estimated risk premium, a common problem in applied work is that there are as many measures of market expectations as there are estimates of the risk premium. We propose a general solution to this problem that allows us to uniquely pin down the best possible estimate of the market expectation for any set of risk premium estimates. We illustrate this approach by solving the long-standing problem of how to recover the market expectation of the price of crude oil. We provide a new measure of oil price expectations that is considerably more accurate than the alternatives and more economically plausible. We discuss implications of our analysis for the estimation of economic models of energy-intensive durables, for the debate on speculation in oil markets, and for oil price forecasting.
Are product spreads useful for forecasting? An empirical evaluation of the Verleger hypothesis
(2013)
Notwithstanding a resurgence in research on out-of-sample forecasts of the price of oil in recent years, there is one important approach to forecasting the real price of oil which has not been studied systematically to date. This approach is based on the premise that demand for crude oil derives from the demand for refined products such as gasoline or heating oil. Oil industry analysts such as Philip Verleger and financial analysts widely believe that there is predictive power in the product spread, defined as the difference between suitably weighted refined product market prices and the price of crude oil. Our objective is to evaluate this proposition. We derive from first principles a number of alternative forecasting model specifications involving product spreads and compare these models to the no-change forecast of the real price of oil. We show that not all product spread models are useful for out-of-sample forecasting, but some models are, even at horizons between one and two years. The most accurate model is a time-varying parameter model of gasoline and heating oil spot spreads that allows the marginal product market to change over time. We document MSPE reductions as high as 20% and directional accuracy as high as 63% at the two-year horizon, making product spread models a good complement to forecasting models based on economic fundamentals, which work best at short horizons.
Various concurrency primitives had been added to functional programming languages in different ways. In Haskell such a primitive is a MVar, joins are described in JoCaml and AliceML uses futures to provide a concurrent behaviour. Despite these concurrency libraries seem to behave well, their equivalence between each other has not been proven yet. An expressive formal system is needed. In their paper "On proving the equivalence of concurrency primitives", Jan Schwinghammer, David Sabel, Joachim Niehren, and Manfred Schmidt-Schauß define a universal calculus for concurrency primitives known as the typed lambda calculus with futures. There, equivalence of processes had been proved. An encoding of simple one-place buffers had been worked out. This bachelor’s thesis is about encoding more complex concurrency abstractions in the lambda calculus with futures and proving correctness of its operational semantics. Given the new abstractions, we will discuss program equivalence between them. Finally, we present a library written in Haskell that exposes futures and our concurrency abstractions as a proof of concept.