Cutting edge: Modelling the correlation function in the crude-oil futures market


As applied to the markets for energy commodities, the importance of correlation coefficients is found in the multiplicity of their roles. These roles can be classified as follows:
•  Valuation,
•  Value-at-risk,
•  Risk premium/energy assets as potential financial investments.

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1. Valuation
A number of real and structured products in energy depend on the coefficient of correlation between two or more futures contracts. The value of

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