Hedging and machine learning driven crude oil data analysis using a refined Barndorff-Nielsen and Shephard model

• URL: http://arxiv.org/abs/2004.14862v3
• Date: Wed, 3 Feb 2021 17:00:41 GMT
• Title: Hedging and machine learning driven crude oil data analysis using a refined Barndorff-Nielsen and Shephard model
• Authors: Humayra Shoshi and Indranil SenGupta
• Abstract summary: In this paper, a refined Barndorff-Nielsen and Shephard (BN-S) model is implemented to find an optimal hedging strategy for commodity markets. The refinement leads to the extraction of a deterministic parameter from the empirical data set. With the implementation of this parameter in the refined model, the resulting model performs much better than the classical BN-S model.
• Score: 0.38073142980732994
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: In this paper, a refined Barndorff-Nielsen and Shephard (BN-S) model is implemented to find an optimal hedging strategy for commodity markets. The refinement of the BN-S model is obtained with various machine and deep learning algorithms. The refinement leads to the extraction of a deterministic parameter from the empirical data set. The problem is transformed to an appropriate classification problem with a couple of different approaches: the volatility approach and the duration approach. The analysis is implemented to the Bakken crude oil data and the aforementioned deterministic parameter is obtained for a wide range of data sets. With the implementation of this parameter in the refined model, the resulting model performs much better than the classical BN-S model.

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