Economic Research and Perspectives

Economic Research and Perspectives

A Dynamic Model for Futures of Iran's Oil Industry

Authors
Hamid Bahmanpour 1
Abdolsadeh Neisy 2
1 Assistant Professor, Department of Business Economics, Allameh Tabataba'i University
2 Associate Professor, Department of Mathematics and Computer Sciences, Allameh Tabataba'i University
Abstract
The main purpose of this paper is to provide a mathematical model for oil future contracts. The study basis has put on the Schwartz Model (1997), but it is clear that with the small change, it is applicable for Iranian Oil Industry Futures. The Schwartz Model has considered only short jumps in the prices, but with recent oil price volatilities having significant effects on oil properties, it is necessary to include both short and long jumps in the model. According to these conditions, the model designed results in a complicated mathematical problem, which forms a Partial Differential Equation (DPE) having integral terms, and boundary and initial conditions. There is no closed solution for such equation. Thus, it should be solved by numerical methods. In the other hand, there is no access to real data for Iranian Oil Market, so we used a simulation model, but it will be possible to use an applied model in Iranian Oil Industry with real data in the future.
Keywords
Oil Futures
Oil Industry Derivatives
Convenience Yields
Financial Mathematics
Mathematical Models
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Economic Research and Perspectives
Volume 14, Issue 4
Winter 2015
Pages 211-228