6533b861fe1ef96bd12c4fa9
RESEARCH PRODUCT
Forecasting the volatility of biofuel feedstock prices: the US evidence
Anupam DuttaGazi Salah UddinJuha-pekka Junttilasubject
0106 biological sciencesNatural resource economics020209 energyAutoregressive conditional heteroskedasticityFood pricesBioengineering02 engineering and technology01 natural scienceshintakehitysenergiamarkkinatraaka-aineetvolatiliteetti010608 biotechnologyGARCH-mallit0202 electrical engineering electronic engineering information engineeringEconomicsbiopolttoaineetta511Renewable Energy Sustainability and the Environmentcorn VIXennusteetBiofuel feedstockbioenergy cropBiofuelbiofuelCIV indexvolatility forecastVolatility (finance)description
Given that, nowadays, 40% of the US corn crop is used for biofuel production, there is a growing concern that the rise in biofuel production might lead to an increase in food prices. However, it is also obvious that significant growth in biofuel use has minimized the demand for fossil fuel and has hence reduced the volume of carbon emissions. It is therefore crucial to model corn market volatility precisely because such an estimate could play a vital role in stabilizing food and biofuel market prices. For this purpose, we consider using the information content of the corn implied volatility (CIV) index to predict the corn futures market return volatility. Using symmetric and asymmetric GARCH‐class models, we find that the CIV index provides additional information beyond what is contained in the historical volatility of the corn market returns, and the information provided by the CIV index improves volatility forecasts for the US corn market. These findings could be extremely useful for energy market participants. peerReviewed
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2019-02-25 | Biofuels, Bioproducts and Biorefining |