Recurrence quantification analysis of energy market crises: a nonlinear approach to risk management
Анотація
The energy market is characterized by unstable price dynamics, which challenge the quantitative models of pricing processes and result in abnormal shocks and crashes. We use recurrence quantification analysis(RQA) to analyze and construct indicators of intermittent events in energy indices, where regular patterns are interrupted by chaotic fluctuations, which could signal the onset of crisis events. We apply RQA to daily data of Henry Hub natural gas spot prices, WTI spot prices, and Europe Brent spot prices. Our empirical results show that the recurrence measures capture the distinctive features of crashes and can be used for effective risk management strategies.
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