The paper investigates the interdependence and conditional correlations between futures contracts and their underlying assets, both for stock and bond markets, and the impact of the interdependence and conditional correlations on VaR forecasts. The paper finds evidence of volatility spillovers from spot (futures) to futures (spot) markets, and time-varying conditional correlations between futures and their underlying assets. It also finds evidence that the DCC model of Engle (2002) provides slightly better VaR forecasts as compared with the CCC model of Bollerslev (1990) and the BEKK model of Engle and Kroner (1995).

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Erasmus School of Economics
hdl.handle.net/1765/17295
Econometric Institute Research Papers
Report / Econometric Institute, Erasmus University Rotterdam
Erasmus School of Economics

Hakim, M.S, & McAleer, M.J. (2009). VaR Forecast and Dynamic Conditional Correlations for Spot and Futures Returns on Stocks and Bonds (No. EI 2009-32). Report / Econometric Institute, Erasmus University Rotterdam (pp. 1–26). Erasmus School of Economics. Retrieved from http://hdl.handle.net/1765/17295