Shanghai Crude Oil Futures Yield Volatility Study

Abstract

Since the listing of Shanghai crude oil futures in March 2018 its market performance has gradually attracted attention. The closing price data of the futures for the period from March 26, 2018 to April 17, 2023 are selected as observations, and a GARCH model is fitted to the futures log return series to analyze the development of Shanghai crude oil futures and its future trend. The study finds that extreme events such as the New Crown epidemic and the Russia-Ukraine conflict had led to high volatility of Shanghai crude oil futures, but the volatility gradually stabilized in the context of the double cycle at home and abroad. The study compares the effectiveness of the GARCH(1,1)-T model and the GARCH(1,1)-GED model in fitting the logarithmic returns of the Shanghai crude oil futures market. the GARCH(1,1)-T model is able to better capture the asymmetry of the market volatility and the phenomenon of sharp peaks and thick tails after taking into account the distributional characteristics of the residuals. In the paper, the closing price of Shanghai crude oil futures in the next 10 days is predicted according to the GARCH(1,1)-T model, and the short-term prediction effect is better.