Futures prices: Data mining and modeling approaches

We present a series of models capturing the non-stationarities and dependencies in the variance of yields on natural gas futures. Both univariate and multivariate models are explored, based on the ARIMA and Hidden-Markov methodologies. The models capture the effects uncovered through various data mining techniques including seasonality, age and transaction-time effects. Such effect have been previously described in the literature, but never comprehensively captured for the purpose of modeling.In addition, we have investigated the impact of temporal aggregation, by modeling both the daily and the monthly data. The issue of aggregation has not been explored in the current literature that focused on the daily data with uniformly underwhelming results. We have shown that modifications to current models to allow aggregation leads to improvements in performance. This is demonstrated by comparing the proposed models to the models currently used in the financial markets.