Comments for Commodity Models

Comment on Literature Review on Oil Depletion by Eric Tham

Eric Tham — Wed, 14 Dec 2011 23:43:30 +0000

Right now with shale oil (not oil shale) and with the recent findings in Bakken and Eagle Ford, the USA is even expected to be an oil exporter. But read James Hamilton’s paper http://dss.ucsd.edu/~jhamilto/handbook_climate.pdf. No amount of technological innovation can stop peak oil from occuring.
But given that shale oil and gas are in a way totally different resources – will it be different this time?

Comment on Recommended Paper – Commodities Futures Curves by Eric Tham

Eric Tham — Wed, 14 Dec 2011 23:40:00 +0000

Please take a look at
http://erictham.wordpress.com/2011/12/15/a-purview-of-the-gabillon-commodity-price-model-widely-used-in-the-financial-sector/

We have common interests. Thanks.

Comment on About Me by Alban de Rouge

Alban de Rouge — Fri, 02 Dec 2011 15:06:51 +0000

Hi Will,
Congrats for your website. Very interesting.
I have heard you are doing a thesis with Geman, great idea!
Hope to see you soon.
Take care,
Alban

Comment on Commodity Futures Curves Visualisation – “The Movie” by Fascinating visulization on contango effects of commodities | RiskCalc.org

Fascinating visulization on contango effects of commodities | RiskCalc.org — Wed, 30 Nov 2011 17:58:54 +0000

[...] http://commoditymodels.com/2010/03/18/commodity-futures-curves-visualisation-the-movie/ [...]

Comment on Commodity Futures Curves Visualisation – “The Movie” by physecon

physecon — Sat, 17 Sep 2011 20:40:36 +0000

That’s really helpful. I’d recommend fixing the bounds of the y-axis though. Letting the scale change with time like that makes it harder to really see things.

Comment on Commodity Prices and Data Sources by Vishal

Vishal — Wed, 03 Aug 2011 14:13:27 +0000

Will,

Can you hint/reveal what you are paying for a Datastream subscription? Academic or commercial? I recollect your post on Wilmott forum regarding Datastream’s pricing. I am in the same spot now.

Thanks.

- Vishal

Comment on Parameter Estimation : Mean Reverting Process by michi m

michi m — Tue, 31 May 2011 14:17:35 +0000

what is wrong or what to do if the coefficient b is negative? i’m trying to estimate rolling lambdas/mu’s (15 day period) and getting some negative b’s with least square and likelihood method…please help me…

Comment on About This Blog by Imonike

Imonike — Sat, 12 Feb 2011 13:26:16 +0000

Hi Will, thanks very much for your response. I think I might say a bit about myself. I am a software engineer working in Ghana. I have been teaching myself statistics,econometrics and R in my spare time. I haven’t traded commodities before, I had just studied to the point where I felt confident enough to try something like this. When you say that I should create a ‘front month’ contract, are you saying that for example if I start with the March 2007 contract for white maize as my white maize front month contract, that I should take all the data I have for this contract to start building my time series for white maize, drop the last few days to avoid roll-over effects, continue to build my time series with the next contract for example April 2007 contract for white maize, ignoring all data that exists for the April 2007 contract before the roll over point and proceed in that fashion, doing like wise for yellow maize?

Thank you for your time.

Imonike

Comment on About This Blog by commoditymodels

commoditymodels — Tue, 08 Feb 2011 09:26:39 +0000

Why not make a ‘front month’ contract, but avoid roll-over effects by rolling what you consider to be ‘front month’ a few days before expiry. It’s the standard way to do it. Or, more advanced, construct a weighted average of the 1st and 2nd month contracts, with the weights recalculated each day, to build a ‘constant maturity’ contract with some duration, say 45 days.

Then do the same for both commodities and run the cointegration over the full time period.

To remove biases, you will have to correctly account for the rebalancing trade as you sell front month and buy 2nd month. Put yourself in the position of a fund, sell some 1 month (at say the closing price), work out how much money you get, and buy 2nd month on the same day, again at the closing price.

Comment on Commodity Futures Curves Visualisation – “The Movie” by commoditymodels

commoditymodels — Tue, 08 Feb 2011 09:23:13 +0000

Hi Tom

Actually a lot of the coding effort for these graphs WAS in the scaling of the axes. If it doesn’t ever jump, I need a really wide y axis to show the whole time range, and you cannot see in detail the ‘shape’ of the curve, which is my emphasis.

If the axis jumps constantly (every frame), the axis becomes a blur and the line remains constant, with only its shape changing.

Glad to know other people are studying and profitiing the roll yield and arbitraging the by-necessity fully-declared-up-front trading strategies of the index funds.

Comment on About This Blog by Imonike Mohammed

Imonike Mohammed — Mon, 07 Feb 2011 19:56:29 +0000

Hello Will,
I was browsing and I came across your blog. I was wondering whether you could give me a few pointers to a problem I am having. Here is the problem:

I am trying to do cointegration analysis of commodity futures data downloaded from the Johannesburg Stock Exchange. I am specifically testing for the presence of a cointegration relationship between the white maize and yellow maize futures. I have commodity futures data starting from November 2006 to mid-April 2010 in my database. When testing I pick a specific contract say “White Maize May 2007″ and its yellow maize equivalent, create a time series of each and test. I was wondering if there was a way I could use all the data I have for the 2 commodities to create each commodity’s time series without introducing any biases. I suspect this would give more accurate results if this were possible.
Any ideas will be greatly appreciated.

Thank you for your time.

Imonike

Comment on CV by Aaron

Aaron — Mon, 31 Jan 2011 07:21:21 +0000

Hi Will,

I’d like to learn commodity risk management model coding in matlab and VBA, Like VaR calculation for commodity holder. I’m looking for some basic code in this area to start my study. But I can’t find much resource through internet. Could you give me some tips about that?

Thanks!

Aaron

Comment on Commodity Futures Curves Visualisation – “The Movie” by Tom

Tom — Fri, 28 Jan 2011 13:02:55 +0000

Hi,

Nice graphs indeed, might be worth fixing the axis scale to improve the visualisation, not very nice when it jumps about.

You underestimate the CTA universe. The vast majority already account for and model commodity roll down in extremely sophisticated ways. There are CTA’s whose entire purpose is to trade this by arbitraging the dislocations which occur when large ETF’s, funds and commodity indices roll their futures.

Comment on Key Papers in Commodities Finance by Immo

Immo — Thu, 25 Nov 2010 10:04:52 +0000

Hi,

I am really fascinated about your homepage, tons of useful information, very cool!

I am wondering whether you know any good paper on a business cycle model of commodities which describes the return of different commodity groups (energy, base metals, precious metals, agriculture) in the different business cycles.

I just read that you are quite familiar with those academic papers, maybe you know some useful stuff!

thx
Immo

Comment on Commodity Futures Curves Visualisation – “The Movie” by Jez Liberty

Jez Liberty — Wed, 13 Oct 2010 18:13:29 +0000

Thanks for the feedback on the hedge fund looking at using roll yield – that’s interesting. I feel it is a topic that has been hotting up lately.
I have actually been talking to another CTA who is looking into this also and he seemed to confirm this (ie lots of CTAs he talks to are using/looking into similar methodologies).

The stockcharts yield curve chart has actually been up for a good few years (I started watching it in 07)

Understand the license issue with data…