A Bimodal Model for Oil Prices
Publication Name
Mathematics
Abstract
Oil price behaviour over the last 10 years has shown to be bimodal in character, displaying a strong tendency to congregate around one range of high oil prices and one range of low prices, indicating two distinct peaks in its frequency distribution. In this paper, we propose a new, single nonlinear stochastic process to model the bimodal behaviour, namely, (Formula presented.). Further, we find analytic approximations of oil price futures under this model in the cases where the stable fixed points of the corresponding deterministic model are (a) evenly spaced about the unstable fixed point and (b) are spaced in the ratio 1:2 about the unstable fixed point. The solutions are shown to produce accurate prices when compared to numerical solutions.
Open Access Status
This publication is not available as open access
Volume
11
Issue
10
Article Number
2222
Funding Number
RG-21-09-19
Funding Sponsor
Deanship of Scientific Research, Imam Mohammed Ibn Saud Islamic University