The impact of jumps and leverage in forecasting the co-volatility of oil and gold futures
This paper investigates the impact of jumps in forecasting co-volatility in the presence of leverage effects for daily crude oil and gold futures. We use a modified version of the jump-robust covariance estimator of Koike (2016), such that the estimated matrix is positive definite. Using this approach, we can disentangle the estimates of the integrated co-volatility matrix and jump variations from the quadratic covariation matrix. Empirical results show that more than 80% of the co-volatility of the two futures contains jump variations and that they have significant impacts on future co-volatility but that the impact is negligible in forecasting weekly and monthly horizons.
|Keywords||Co-volatility, Commodity markets, Forecasting, Jump, Leverage effects, Realized covariance, Threshold estimation|
|Persistent URL||dx.doi.org/10.3390/en12173379, hdl.handle.net/1765/119585|
Asai, M, Gupta, R. (Rangan), & McAleer, M.J. (2019). The impact of jumps and leverage in forecasting the co-volatility of oil and gold futures. Energies, 12(17). doi:10.3390/en12173379