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ARTÍCULO
TITULO

Heavy Metals: Might as Well Jump

Neil A. Wilmot    

Resumen

Financial times series, and commodity prices in particular, are known to exhibit fat tails in the distribution of prices. As with many natural resources price series, the arrival of new information can lead to unexpectedly rapid changes?or jump?in prices. This suggests that natural resource commodity prices should follow a more complex process than geometric Brownian motion (GBM), which is linked to the Gaussian distribution. The presence of jumps (discontinuities) in several heavy metal price series is investigated, as well as time-varying volatility. The results demonstrate that allowing for jumps and time-varying volatility provides statistically important improvements in the modelling or prices, relative to GBM. These complex processes contributed to the fatness of the tails in the distribution of heavy metal price returns.

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