A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price
Global liquefied petroleum gas (LPG) trade shows an increasing trend but is under-researched. This paper focuses on the LPG market and aims to model the dependence dynamics among LPG freight rates, crude oil price and propane location arbitrage. Conditional copula-GARCH model is applied to estimate...
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sg-ntu-dr.10356-1507792021-06-02T03:05:03Z A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price Bai, Xiwen Lam, Jasmine Siu Lee School of Civil and Environmental Engineering Engineering::Civil engineering Liquefied Petroleum Gas Shipping Freight Global liquefied petroleum gas (LPG) trade shows an increasing trend but is under-researched. This paper focuses on the LPG market and aims to model the dependence dynamics among LPG freight rates, crude oil price and propane location arbitrage. Conditional copula-GARCH model is applied to estimate dependencies. Different types of copulas with both time-invariant and time-varying dependence structures are fitted and their suitability has been compared. The findings suggest that firstly, Baltic LPG (BLPG) freight rate and the arbitrage between propane Far East and Middle East prices have conditional time-varying dependence and the dependence is higher in market downturns. Furthermore, BLPG and the arbitrage between Far East and US propane prices, have symmetric dependence and such a relationship has strengthened since 2013. Secondly, Middle East propane price is found to have the strongest correlation with crude oil prices compared to Far East and US propane prices, indicating higher sensitivity to crude oil price changes. Last but not least, the relationship between crude oil and BLPG is relatively weak and mostly positive. 2021-06-02T03:05:03Z 2021-06-02T03:05:03Z 2019 Journal Article Bai, X. & Lam, J. S. L. (2019). A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price. Energy Economics, 78, 412-427. https://dx.doi.org/10.1016/j.eneco.2018.10.032 0140-9883 https://hdl.handle.net/10356/150779 10.1016/j.eneco.2018.10.032 2-s2.0-85058409297 78 412 427 en Energy Economics © 2018 Elsevier B.V. All rights reserved. |
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Engineering::Civil engineering Liquefied Petroleum Gas Shipping Freight Bai, Xiwen Lam, Jasmine Siu Lee A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price |
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Global liquefied petroleum gas (LPG) trade shows an increasing trend but is under-researched. This paper focuses on the LPG market and aims to model the dependence dynamics among LPG freight rates, crude oil price and propane location arbitrage. Conditional copula-GARCH model is applied to estimate dependencies. Different types of copulas with both time-invariant and time-varying dependence structures are fitted and their suitability has been compared. The findings suggest that firstly, Baltic LPG (BLPG) freight rate and the arbitrage between propane Far East and Middle East prices have conditional time-varying dependence and the dependence is higher in market downturns. Furthermore, BLPG and the arbitrage between Far East and US propane prices, have symmetric dependence and such a relationship has strengthened since 2013. Secondly, Middle East propane price is found to have the strongest correlation with crude oil prices compared to Far East and US propane prices, indicating higher sensitivity to crude oil price changes. Last but not least, the relationship between crude oil and BLPG is relatively weak and mostly positive. |
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School of Civil and Environmental Engineering |
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School of Civil and Environmental Engineering Bai, Xiwen Lam, Jasmine Siu Lee |
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Bai, Xiwen Lam, Jasmine Siu Lee |
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Bai, Xiwen |
title |
A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price |
title_short |
A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price |
title_full |
A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price |
title_fullStr |
A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price |
title_full_unstemmed |
A copula-GARCH approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price |
title_sort |
copula-garch approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate, product price arbitrage and crude oil price |
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2021 |
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https://hdl.handle.net/10356/150779 |
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1702431214782119936 |