Seminari
19 luglio 2018

FEEM Research Seminar on "Interpreting the oil risk premium: do oil price shocks matter?"


Dove: Milan
Sede:

Fondazione Eni Enrico Mattei
Corso Magenta 63
20123 Milan
***
video-conference (at FEEM Venice) and GoToMeeting broadcast available

Orario dell'evento:

h. 12.30 Seminar
In Milan a light lunch will follow the seminar for registered participants.

Informazione:

Registration is required. Please confirm your participation here.
Seminars Office, seminars@feem.it

Speakers:

Daniele Valenti - Università degli Studi di Milano

Abstract

This paper provides an analysis of the link between the global market for crude oil and oil futures risk premium at the aggregate level. It offers empirical evidence on whether the compensation for risk required by the speculators depends on the type of the structural shock of interest. Understanding the response of the risk premium to unexpected changes in the price of oil can be useful to address some research questions, among which: what is the relationship between crude oil risk premium and unexpected rise in the price of oil? On average, what should speculators expect to receive as a compensation for the risk they are taking on?
This work is based on a Structural Vector Autoregressive (SVAR) model of the crude oil market. Two main results emerge. First, the impulse response analysis provides evidence of a negative relationship between the risk premium and the changes in the price of oil triggered by shocks to economic fundamentals. Second, this analysis shows that the historical decline in the risk premium can be modelled as a part of endogenous effect of the oil market driven shocks.

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