Abstract for: Modeling Dynamics of Expectations on Global Oil Price
The global oil price is considered as one of the most significant factors in the global trade market. This is due to the fact that many of the macro and micro-economic variables on both sides of the oil trade are heavily dependent on the global oil price. The stochasticity of the market makes it extremely difficult to predict the exact amount of the price. The main reason is that, unlike many other markets, the unconventional nature of the oil market is not merely determined by the total demand and supply. In this paper, we introduce a novel approach that models the impacts of parameters other than demand and supply on the oil price and we call them as expectational variable and parameters. As observed by simulations and results, some of these parameters can impose sharp and drastic price changes in a rather small time period while the total demand and supply remain unchanged.