Understanding Dynamic Conditional Correlations between Commodities Futures Markets

Modelling Dynamic Conditional Correlations in Spot, Forward and Futures Returns

Volatility (or risk) is a key variable in many areas of finance, and there are many applications that require an accurate estimate of volatility. One important application is in designing optimal dynamic hedging strategies. Engle (1982) proposed an autoregressive conditional heteroscedasticity (ARCH) model, which allows the conditional variance to change over time. This model has been extended ...

Cross-correlations between spot and futures markets of nonferrous metals

In this paper, we investigate cross-correlations between nonferrousmetal spot and futures markets using detrended cross-correlation analysis (DCCA). We find the existence of significant cross-correlations for both return and volatility series. The DCCA-based crosscorrelation coefficients are very high and decrease with the futures maturity increases. Using the multifractal extension of DCCA, th...

A test of the efficiency of futures markets in commodities

Multi-scale correlations in different futures markets

In the present work we investigate the multiscale nature of the correlations for high frequency data (1 min) in different futures markets over a period of two years, starting on the 1st of January 2003 and ending on the 31st of December 2004. In particular, by using the concept of local Hurst exponent, we point out how the behaviour of this parameter, usually considered as a benchmark for persi...

Modelling Volatilities and Conditional Correlations in Futures Markets with a Multivariate t Distribution

This paper considers a multivariate t version of the Gaussian dynamic conditional correlation (DCC) model proposed by Engle (2002), and suggests the use of devolatized returns computed as returns standardized by realized volatilities rather than by GARCH type volatility estimates. The t-DCC estimation procedure is applied to a portfolio of daily returns on currency futures, government bonds and...