Federal Dposit InsuranceCorporation• Center for Financial Researchh
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2009-08
Speculation and Recent Volatility in the Price of Oil
October 2009
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
Sanjiv R. Das
Darrell Duffie
Nikunj Kapadia
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
Risk-Based Capital Standards,
Deposit Insurance and Procyclicality
FDIC Center for Financial Research
Working Paper
No. 2009-08
Speculation and Recent Volatility in the Price of Oil
October 2009
Empirical Comparisons and Implied Recovery Rates
kkk
An Empirical
An Empirical Analysis
State-
Efraim Benmel Efraim Benmelech May, 2005
June 20
May , 2005 Asset S2005-14
September 2005
Speculation and Recent Volatility in the Price of Oil
James Einloth
jeinloth@fdic.gov
Division of Insurance and Research
Federal Deposit Insurance Corporation
February 2009, Revised August 2009
As the price of crude oil doubled from June 2007 to June 2008, suspicion grew that price was
being driven higher by speculation rather than fundamental supply and demand. After having
seen the price drop 70 percent from its peak, this explanation may appear more plausible than
ever. This paper introduces a new methodology that uses convenience yield – imputed from
futures prices – to detect the influence of speculation on the spot price of a storable commodity.
The paper finds the evidence inconsistent with speculation having played a major role in the rise
of price to $100 per barrel in March 2008. However, the evidence suggests that speculation did
play a role in its subsequent ri se to $140. Finally, the analysis fi nds that the coll apse in price
was caused by an unanticipated decline in demand rather than by speculators unloading their
positions. This implies that, absent the discovery of vast new sources of energy, high oil prices
will return with the recovery of the global economy.
* I thank Lutz Kilian, Paul Kupiec, Jonathan Sc hwartz, and Carlos Ramirez for their insightful
suggestions and Christine Lipuma and Abhinav Kapur for research assistance. This draft has
also benefitted from participants in the FDIC Center for Financial Research seminar. The views
expressed in this paper are those of the author, and do not reflect those of FDIC.
1
James Einloth
jeinloth@fdic.gov
Division of Insurance and Research
Federal Deposit Insurance Corporation
February 2009, Revised August 2009
As the price of crude oil doubled from June 2007 to June 2008, suspicion grew that price was
being driven higher by speculation rather than fundamental supply and demand. After having
seen the price drop 70 percent from its peak, this explanation may appear more plausible than
ever. This paper introduces a new methodology that uses convenience yield – imputed from
futures prices – to detect the influence of speculation on the spot price of a storable commodity.
The paper finds the evidence inconsistent with speculation having played a major role in the rise
of price to $100 per barrel in March 2008. However, the evidence suggests that speculation did
play a role in its subsequent ri se to $140. Finally, the analysis fi nds that the coll apse in price
was caused by an unanticipated decline in demand rather than by speculators unloading their
positions. This implies that, absent the discovery of vast new sources of energy, high oil prices
will return with the recovery of the global economy.
* I thank Lutz Kilian, Paul Kupiec, Jonathan Sc hwartz, and Carlos Ramirez for their insightful
suggestions and Christine Lipuma and Abhinav Kapur for research assistance. This draft has
also benefitted from participants in the FDIC Center for Financial Research seminar. The views
expressed in this paper are those of the author, and do not reflect those of FDIC.
1