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Pricing Crude Palm Oil Futures (FCPO) in Malaysia
Evon Ong
Supervisor: Dr. Hassilah Binti Salleh
Bachelor of Science (Financial Mathematics)
School of Informatics and Applied Mathematics
In most of researches, it is found that incorporate more than one characteristics of
agricultural commodities futures prices in the pricing model is outperformance due to
these prices move in special characteristics. However, there is no similar research in
pricing Malaysia’s Crude Palm Oil Futures (FCPO). Therefore, the purpose of this paper is
to investigate the presence of stochastic volatility, price jumps and seasonality in daily
FCPO prices for determining better FCPO pricing model. For that, daily FCPO log returns
are examined by using GARCH(1,1) model and stochastic volatility (SV) model and then
both models are compared to show SV model is better to forecast FCPO returns. Monthly
volatilities used for seasonality analysis meanwhile Barndorff-Nielsen and Shephard (BNS)
jump test conducted with realized variance and bipower variation. According to the
results, stochastic volatility and seasonality are present in FCPO returns. Finally, this paper
could help in providing better FCPO pricing model.
803 | UMT UNDERGRADUATE RESEARCH DAY 2018