Predicting the volatility of major energy commodity prices: the dynamic persistence model
Journal: arXiv (Cornell University)
Year: 2024

Time variation and persistence are crucial properties of volatility that are often studied separately in energy volatility forecasting models. Here, we propose a novel approach that allows shocks with heterogeneous persistence to vary smoothly over time, and thus model the two together. We argue that this is important because such dynamics arise naturally from the dynamic nature of shocks in energy commodities. We identify such dynamics from the data using localised regressions and build a model