Volatility Term Structures in Commodity Markets

Journal of Futures Markets, Forthcoming

65 Pages Posted: 12 Dec 2019

See all articles by Fabian Hollstein

Fabian Hollstein

Leibniz University Hannover - School of Economics and Management

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management; University of Reading - ICMA Centre

Christoph Wuersig

Leibniz Universität Hannover - Faculty of Economics and Management

Date Written: November 22, 2019

Abstract

In this study, we comprehensively examine the volatility term structures in commodity markets. We model state-dependent spillovers in principal components (PCs) of the volatility term structures of different commodities, as well as that of the equity market. We detect strong economic links and a substantial interconnectedness of the volatility term structures of commodities. Accounting for intra-commodity-market spillovers significantly improves out-of-sample forecasts of the components of the volatility term structure. Spillovers following macroeconomic news announcements account for a large proportion of this forecast power. There thus seems to be substantial information transmission between different commodity markets.

Keywords: commodities, information transmission, spillovers, volatility term structure

JEL Classification: G10, G14, G17

Suggested Citation

Hollstein, Fabian and Prokopczuk, Marcel and Wuersig, Christoph, Volatility Term Structures in Commodity Markets (November 22, 2019). Journal of Futures Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3491715

Fabian Hollstein

Leibniz University Hannover - School of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Christoph Wuersig (Contact Author)

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

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