Forecasting Volatility and Spillovers in Crude Oil Spot, Forward and Futures Markets
AbstractCrude oil price volatility has been analyzed extensively for organized spot, forward and futures markets for well over a decade, and is crucial for forecasting volatility and Value-at- Risk (VaR). There are four major benchmarks in the international oil market, namely West Texas Intermediate (USA), Brent (North Sea), Dubai/Oman (Middle East), and Tapis (Asia- Pacific), which are likely to be highly correlated. This paper analyses the volatility spillover effects across and within the four markets, using three multivariate GARCH models, namely the CCC, VARMA-GARCH and VARMA-AGARCH models. A rolling window approach is used to forecast the 1-day ahead conditional correlations. The paper presents evidence of volatility spillovers and asymmetric effects on the conditional variances for most pairs of series. In addition, the forecasted conditional correlations between pairs of crude oil returns have both positive and negative trends.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-641.
Length: 24 pages
Date of creation: Aug 2009
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Other versions of this item:
- Chia-Lin Chang & Michael McAleer & Roengchai Tansuchat, 2009. "Forecasting Volatility and Spillovers in Crude Oil Spot, Forward and Futures Markets," CARF F-Series CARF-F-163, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- Chang, C-L. & McAleer, M.J. & Tansuchat, R., 2009. "Forecasting volatility and spillovers in crude oil spot, forward and future markets," Econometric Institute Report EI 2009-12, Erasmus University Rotterdam, Econometric Institute.
- NEP-ALL-2009-08-22 (All new papers)
- NEP-ENE-2009-08-22 (Energy Economics)
- NEP-FMK-2009-08-22 (Financial Markets)
- NEP-FOR-2009-08-22 (Forecasting)
- NEP-SEA-2009-08-22 (South East Asia)
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