Stochastic volatility, jumps and leverage in energy and stock markets: Evidence from high frequency data

Christopher Baum, Paola Zerilli and Liyuan Chen

Energy Economics, 2021, vol. 93, issue C

Abstract: In this paper, we propose a model for futures returns that has the potential to provide both individual investors and firms who have positions in financial and energy commodity futures a valid tail risk management tool. In doing so, we also aim to explore the commonalities between these markets and the degree of financialization of energy commodities. While empirical studies in energy markets embed either leverage or jumps in the futures return dynamics, we show that the introduction of both features improves the ability to forecast volatility as an indicator for risk for both the S&P500 and natural gas futures markets.

Keywords: Stochastic volatility; Energy futures; VaR; CVaR; High frequency data; Leverage effect; Jumps (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Stochastic volatility, jumps and leverage in energy and stock markets: evidence from high frequency data (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:93:y:2021:i:c:s0140988319302622

DOI: 10.1016/j.eneco.2019.104481

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