A Study On Price Volatility Of China Fuel Oil Futures

This paper reviews the domestic and overseas development of the oil futures. It is necessaryto study the features and the reasons of the China fuel oil futures price volatility because of theunique price volatility risk deriving from the higher relativity between the oil futures market andthe cash market, the more strong policy influences, and the more difficulty to disperse the risks.The statistic test shows the features of the time series of the price volatility as leptokurtosis andfat-tail and volatility cluster. The conclusions of the GARCH(1,1) model and theEGARCH(1,1)-M model suggest that, firstly, the present volume and the present open interesthave the good explanation to the volatility; secondly, the lagged volume and the lagged openinterest have no explaination; thirdly, the oil futures market has been closed to weak formefficiency; fourthly, the oil future market has been in low activity for the impact of the policiesaccording to the weak persistence of the price volatility; lastly, the price volatility of the oilfutures has the strong leverage effect, which is relative to the investors's rational choices.