Equilibrium Exhaustible Resource Price Dynamics
We develop equilibrium models of an exhaustible resource market where both prices and extraction choices are determined endogenously. Our analysis highlights a role for adjustment costs in generating price dynamics that are consistent with observed oil and gas forward prices as well as with the two-...
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| Veröffentlicht in: | NBER Working Paper Series 2006-02, p.12000 |
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| creator | Titman, Sheridan Khokher, Zeigham Carlson, Murray |
| description | We develop equilibrium models of an exhaustible resource market where both prices and extraction choices are determined endogenously. Our analysis highlights a role for adjustment costs in generating price dynamics that are consistent with observed oil and gas forward prices as well as with the two-factor prices processes that were calibrated in Schwartz and Smith (2000). Stochastic volatility aries in our two-factor model as a natural consequence of production for oil and natural gas prices. Differences between the endogenous price processes considered in earlier papers can generate significant differences in both financial and real option values. |
| doi_str_mv | 10.3386/w12000 |
| format | Article |
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| identifier | ISSN: 0898-2937 |
| ispartof | NBER Working Paper Series, 2006-02, p.12000 |
| issn | 0898-2937 |
| language | eng |
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| source | National Bureau of Economic Research Publications; Alma/SFX Local Collection |
| subjects | Asset Pricing Commodities Corporate Finance Costs Economic theory Equilibrium Gasoline prices Natural gas prices Natural gas reserves Oil reserves Production increases Securities prices Volatility |
| title | Equilibrium Exhaustible Resource Price Dynamics |
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