An empirical study on regulated Chinese agricultural commodity futures markets based on skew Ornstein-Uhlenbeck (OU) model

In this research, we depict the regulated agricultural commodity futures markets in China, in which we focus on six actively-traded futures: corn, strong gluten wheat, No.1 soybean, soymeal, cotton and white sugar. A novel skew OU model is employed to characterize dynamics with the controls. The empirical analysis reveals that there exist significant skew phenomena in these six futures markets and indicates that the price dynamics are regulated by the state policy. Particularly, for grain futures, the observed skew phenomena are the most obvious while we detect relatively weaker evidence of skew phenomena in oilseeds and softs futures markets than grain futures, but still statistically significant. In addition, generalized quasi-likelihood ratio tests show that skew OU model is superior to OU model.