Study On The Duration And Application Of China’s Fuel Oil Futures Market

Duration is an important microstructure signal, reflects the process of makingdecision and dynamic changes. The study of duration can help us to understand thefinancial market behavior and its microstructure better. This paper made acomprehensive study on different duration characteristic, the microinfluenceelement,and duration application of our fuel oil futures market.The high frequency data of five time frequency is optimum for the fuel oilfutures market which is generated by the rule of daily max trading volume. This paperestimated and contrasted different ACD model with each duration by using diversequantitative evaluation criterions, then selected the best model of each durationaccordingly, before analyzed the characteristic and influence elements of differentduration in fuel oil futures market. The LOGWACD model is relatively superiorwhen built price duration, trading volume duration and open interest duration modelwith high frequency data, while the LOGEACD model is relatively better when builttrading volume duration and quote price duration model with ultrahigh frequencydata. This paper studied on different duration feature, it could be find that eachduration has obvious persistence, volatility clustering. In aspect of intraday character,price duration, trading volume duration and open interest duration all present“doubleN”pattern in a.m. and p.m., trade duration presents“N”pattern in a.m.,but“∩”pattern in p.m., besides quote price duration are provied With“Г”pattern all day.Then, various microstructure variations were added into on the basis of each superiormodel to do the empirical research in order to find out the microinfluenceelement accordingly, which most of the variations have obvious explanation effect toaccording duration.This paper studied the effect of foreign future trading on the domestic fuel oilfutures market from the perspective of duration. Results indicate that domestic futuresmarket behavior has a certain difference between the SGX during trading section ornot, which shows the SGX has a certain extent of information spillovers effect on thedomestic market. What’s more, synchronous trading section with the foreign markethas relatively shorter trade duration and price duration, and greater trade density andmore frequent price volatility, but the absolute difference of market behaviors isinconspicuous because of the limitation of liquidity effect. The study on the volatility of fuel oil futures market with the duration model andvolatility model shows that the market hasn’t obvious risk premium and volatilityasymmetry effect. There is no obvious effect on futures return by duration, tradingvolume and open interest volume. Positive correlation exists among trading volume,open interest volume and trading reach ratio with volatility. All these results attest tothe Easley and O’Hara’s market microstructure theory, proving that the theory haspreferable applicability in our fuel oil futures market.This paper applied the duration model to the measurement of daily VaR andintraday VaR in the fuel oil futures market, and the efficiency test was made withdifferent kinds of data and model. Results indicate that the measurement based onultrahigh frequency data and duration model better. The comprehensive intraday VaRmeasurement model based on duration model, volatility model and Monte Carlosimulation method predicts better than traditional methods with fix time interval. It isdiscovered that the intraday VaR will maximize at opening in the fuel oil futuresmarket, decreasing rapidly in a short later period, approaching stability gradually,when the IVAR model was used to measure the intraday VaR of forecasting timewindow.This paper built joint duration reflecting the joint variation among price, tradingvolume and open interest volume, and the binary choice model was built under thisframe in order to empirically test the shortterm predictability of volume and priceanalytical method. The research results indicate that the binary choice model predictsbetter in the short term under the frame of joint duration, over half of the empiricalrules have been verified, which illuminates that volume and price analytical method iseffect in shortterm price forecasting, and it is one of important and worth trustingtechnical analysis method.Finally, this paper came up with the solutions and suggestions in improving themicromechanism of fuel oil futures market in five aspects, that is the standardcontrast design, exchange mechanism, trading pattern, traders’quantity and structure,and so on.These are 98 figures, 68 tables and 104 references.