An Analysis of Relations between Volatilities and Contagion Effect of Futures: The Cases of Food, Oil and Biofuels

• Main Authors: Yen-Chun Lin, 林彥君
• Other Authors: Jo-Hui Chen
• Format: Others
• Language: en_US
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/31092711304912828355

碩士 === 中原大學 === 企業管理研究所 === 100 === The oil prices had soared from 2007 to 2008 that emerged alternative energy, propelling the prices of cereals (corns, wheat, soybeans) and sugar which can be made from biofuel rocketed. In accordance with IMF statistics, from 2007 to 2008, the prices of corns, wheat, soybeans and rice had respectively risen 41%, 146%, 71% and 29%. Owing to severely fluctuated commodity prices may increase the risk of the prices that confront investors and consumers, the purpose of this study is to analyze the variables whether exist the volatility transmission to provide the reference to investors or hedgers embarking on hedging strategy. In the study, we apply multivariate GARCH model to examine the correlation between the variable prices of oil and biofuels, and bilaterally measure the contagious effect and volatility spillovers of food prices. In the other word, we analyze the interplay of energy and food markets by multivariate CCC, DCC, BEKK model to evaluate the message transmission and contagion effect between the agricultural production and energy markets. Thus, the experimental results show that the fitness of DCC model is better than CCC model’s. We find that oil-soybeans, oil-biofuel, and sugar-bioethanol are respective highly significant in DCC model, denoting that the long-run and short-run relationships appeared. The study displays that if prices in the energy markets are unexpectedly fluctuated, they will immediately and strongly impact to other food prices. To sum up, in the study, we find that the markets volatility can influence other markets and have an effect on volatility, expressing that markets have the phenomena of volatility spillovers and contagion.