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DT 17/15 - An examination of the relationship between biodiesel and soybean oil prices using an asset pricing model

This work utilized a discrete time return model of finance to analyze whether prices changes of soybean oil, the main feedstock for biodiesel production in the US affect the prices of biodiesel. Empirical models of asset pricing attempt to extract information about latent state variables and structural parameters from observed prices. These models, which often involve high dimension latent state variables, can be conveniently estimated using Bayesian methods. Results from this study indicate the price of soybean oil does not have a strong direct impact on the price of biodiesel in the short run, or in a daily basis.
 
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