Recurrence quantification analysis of energy market crises: a nonlinear approach to risk management
Year: 2023
Type: conference-paper
Abstract: 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.
Institutions: Kryvyi Rih State Pedagogical University, State University of Economics and Technology, Kyiv National Economic University named after Vadym Hetman, Kryvyi Rih National University, Zhytomyr Polytechnic State University, National Academy of Educational Sciences of Ukraine, Institute for Digitalisation of Education of the NAES of Ukraine, Academy of Cognitive and Natural Sciences, Rochester Institute of Technology
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4386431246