Volatility Transmission across Commodity Futures Markets

Chau, F.; Deesomsak, R.

Abstract

Sharp movements in crude oil prices and their impact on other commodities have renewed interest in the assessment of dynamic interactions between commodity futures markets. This chapter examines this topic by investigating the intensity and direction of volatility transmission across three major classes of commodities, including agricultural products (corn, coffee, and soybeans), energy (crude oil and gas), and metals (copper, gold, and silver). Overall, the evidence suggests that important volatility episodes and fluctuations exist across major commodity markets; the total cross-market spillovers are limited until the onset of financial crisis of 2007–2008. As the crisis intensified, so too did the commodity volatility spillovers, with substantial stress carrying over from the energy and metal markets to others. These findings are important in understanding the level and transmission mechanism of risk across commodity futures markets and are relevant to regulators in formulating policies to tackle excessive volatility, particularly during turbulent periods.

Citation

Chau, F., & Deesomsak, R. (2018). Volatility Transmission across Commodity Futures Markets. In H. K. Baker, G. Filbeck, & J. H. Harris (Eds.), Commodities : markets, performance, and strategies (331-350). Oxford University Press. https://doi.org/10.1093/oso/9780190656010.003.0018

• Online Publication Date: Apr 26, 2018
• Publication Date: Apr 26, 2018
• Deposit Date: Oct 21, 2017
• Publicly Available Date: Oct 23, 2017
• Publisher: Oxford University Press
• Pages: 331-350
• Series Title: Financial markets and investments
• Book Title: Commodities : markets, performance, and strategies.
• Chapter Number: 18
• ISBN: 9780190656010
• DOI: https://doi.org/10.1093/oso/9780190656010.003.0018
• Public URL: https://durham-repository.worktribe.com/output/1666541
• Contract Date: Sep 23, 2017