FRB: War and Peace: Recovering the Market's Probability Distribution of Crude Oil Futures Prices During the Gulf Crisis

International Finance Discussion Papers

War and Peace: Recovering the Market's Probability Distribution of Crude Oil Futures Prices During the Gulf Crisis
William R. Melick and Charles P. Thomas
1992-437 (October 1992)

Abstract: This paper investigates the market's expectations for oil prices during the Persian Gulf crisis. To do so a general method for using options markets to recover the implied distribution for futures prices is developed. The method applies to a wide class of distributions. In particular, it is not limited to those distributions arising from diffusion or jump-diffusion processes.

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