Quants puzzle over how to handle negative oil prices

Firms are choosing to cut ‘outlier’ prices from data or to rely more on fundamental inputs

When the oil price went negative last month, quants were confronted with something their models had never before seen. Some firms have treated the episode as an outlier that can be removed from the data. Others are falling back on fundamental analysis for a steer on whether the same could happen again.

Treating the event as a one-off avoids the risk of updating strategies in ways that curb their effectiveness in normal conditions. However, dismissing the oil plunge as a freak episode risks