
Podcast: Ronn on using a financial-economics approach to forecast crude oil spot prices
Professor of finance talks about using equity, index and crude oil options to forecast spot prices

Ehud Ronn is professor of finance at the University of Texas at Austin. In this podcast he talks about his latest research into forecasting oil prices by using equity, commodity and market options to infer idiosyncratic variances for individual oil stocks and forward-looking betas for oil futures contracts.
These signals, taken alongside other forward-looking measures, such as the Chicago Board Options Exchange’s volatility index and the CBOE S&P 500 Implied Correlation Index (ICJ), provide the “message from markets”, says Ronn.
By using both historical and implied data, Ronn is able to calibrate term structures of equity betas and idiosyncratic variance. For example, the research identifies periods when stocks’ idiosyncratic variance tends to drop ahead of a systemic crisis. Similarly, a rise in idiosyncratic variance during a crisis tends to signal the end of the crisis is nearing.
Regarding oil prices, Ronn’s method results in price forecasts that are expressed in terms of the futures prices for the corresponding maturity, plus or minus a risk differential.
Ronn will be presenting this research at Energy Risk USA in Houston on Wednesday, May 15. Energy Risk USA runs between May 13 and 16, 2019.
To hear the full interview, listen in the player above, or download.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Commodities
Energy Risk Asia Awards 2023: the winners
Winning firms demonstrate resiliency and robust risk management amid testing times
ION Commodities: addressing the market’s recent pain points
Energy Risk Software Rankings winner’s interview: ION Commodities
Energy Risk Commodity Rankings 2023: adapting to new market dynamics
Winners of the 2023 Commodity Rankings provided reliability when clients faced extreme change
Energy Risk Software Rankings 2023: managing uncertainty
Unpredictable markets make CTRM software choices key
Navigating the volatility and complexity of commodity markets
Commodity markets have experienced significant challenges since the Covid-19 pandemic, the conflict in Ukraine and the subsequent sanctions imposed on Russia. These unprecedented events have caused fluctuations in supply and demand, disrupted global…
Energy Risk Asia Awards 2022
Recognising excellence in energy risk management
Market shrugs off EC’s plan to change gas benchmark
Dutch TTF prices unmoved, as market participants say they are “not taking it seriously”
EU plan to suspend power derivatives gets icy response
Proposal from energy ministers to ease collateral burdens blasted as “silly” and “terrible idea”