Exploring Seasonal Variance among Light Sweet Crude and Corn Futures Caleb Seeley 2/27/08

Introduction Examine Light Sweet Crude futures prices at 5 minute intervals over 20 years ( ) Examine Corn futures prices at 5 minute intervals over 25 years ( ) Begin by looking for significant jumps and then continue by examining variance month by month Using Bardorff-Nielson and Shephard model of jump testing.

Background Mathematics Realized Variation: Realized Bi-Power Variation:

Background Mathematics Part 2 The relative jump is defined: RJ t = (RV t – BV t ) / RV t In order to studentize the RJ t one needs to estimate the integrated quarticity

Background Mathematics Part 3 Tri-Power Quarticity Z-statistic – used.999 significance level (3.09)

Crude Results Average RV = Average BV = Annualized RV = 27.87% Annualized BV = 27.16% Jump Days = 81 (1.54%)

Impact of Season on Jumps Crude oil demand varies seasonally Are jumps clustered during a certain season?

Results Winter Jumps:17 (21%) Spring Jumps:27 (33%) Summer Jumps:17 (21%) Fall Jumps:20 (25%) Warm Weather Jumps:44 (54%) Cold Weather Jumps:37 (46%)

Corn Results Average RV = Average BV = Annualized RV = 17.03% Annualized BV = 15.89% Jump Days: 372 (5.8%)

Seasonal Jumps Winter Jumps: 105 (28.2%) Spring Jumps: 78 (20.97%) Summer Jumps: 101(27.15%) Fall Jumps: 88 (23.66%) Warm Weather Jumps: 193 (51.88%) Cold Weather Jumps: 179 (48.12%)

Extensions Factor test on Z values of oil and corn futures See if there are corresponding news events (wars, weather disasters, etc. ) for jumps Continue to expand jumps related to season – weekly RV and BV measures,