Volatility term structures in commodity markets. Issue 4 (16th December 2019)

• Record Type: Journal Article
• Authors: Hollstein, Fabian; Prokopczuk, Marcel; Würsig, Christoph
• Is Part Of: Journal of futures markets. Volume 40:Issue 4(2020)
• Page Start: 527
• Page End: 555
• Publication Date: 2019-12-16
• Subjects: commodities -- information transmission -- spillovers -- volatility term structure; Commodity exchanges -- Periodicals; Foreign exchange futures -- Periodicals; 332.632
• DOI: 10.1002/fut.22083
• Languages: English
• ISSNs: 0270-7314

Abstract

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.