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Forecasting the volatility of biofuel feedstock prices: the US evidence
Univ Vaasa, Finland.
Univ Jyvaskyla, Finland.
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
2019 (English)In: Biofuels, Bioproducts and Biorefining, ISSN 1932-104X, E-ISSN 1932-1031, Vol. 13, no 4, p. 912-919Article in journal (Refereed) Published
Abstract [en]

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. (c) 2019 Society of Chemical Industry and John Wiley amp; Sons, Ltd

Place, publisher, year, edition, pages
WILEY , 2019. Vol. 13, no 4, p. 912-919
Keywords [en]
bioenergy crop; corn VIX; biofuel; GARCH models; volatility forecast; CIV index
National Category
Energy Systems
Identifiers
URN: urn:nbn:se:liu:diva-159592DOI: 10.1002/bbb.1981ISI: 000476550800008OAI: oai:DiVA.org:liu-159592DiVA, id: diva2:1342287
Note

Funding Agencies|Jan Wallander and Tom Hedelius Foundations

Available from: 2019-08-13 Created: 2019-08-13 Last updated: 2019-08-13

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
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  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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