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Time-varying jumps in China crude oil futures market impacted by COVID-19 pandemic

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  • Hu, Genhua
  • Jiang, Haifeng

Abstract

China crude oil futures market launched in 2018 has become the third-largest global crude oil exchange, indicating its important role in global crude oil markets. Understanding the time-varying jumps of the newly RMB denominated crude oil futures market is not only for the benefit of the market participants in risk management and hedging, but also for the reference of policy-makers in formulating regulation policies, market pricing and financializing energy markets. However, the literature on time-varying jumps in China crude oil futures market is quite scarce compared with existed literature. In this regard, we attempt to study time-varying jumping behaviors of China crude oil futures market impacted by discrete random events, and analyze the sensitivity of jump intensity, jump size and its variance to market volatility and historical volatility, applying the constant and time-varying intensity jump models, based on the daily returns of China crude oil futures market from March 26, 2018 to August 31, 2021. Further, we compare the differential jumps of China crude oil futures market impacted by COVID-19 pandemic. The empirical results have shown that significant time-varying jumping behaviors appear in China crude oil futures market and take on discrete jumping form. The jump intensity is persistent and sensitive to historical volatility of the market. Meanwhile, jump intensity and jump size increase suffered by great public health emergency, and negative jump size arises with high probability. However, the variance of jump size is little sensitive to historical volatility of the market. These findings suggest that the time-varying jumps, especially negative jumps, should be considered for decision-makers and market participants associated with China crude oil futures market.

Suggested Citation

  • Hu, Genhua & Jiang, Haifeng, 2023. "Time-varying jumps in China crude oil futures market impacted by COVID-19 pandemic," Resources Policy, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:jrpoli:v:82:y:2023:i:c:s0301420723002180
    DOI: 10.1016/j.resourpol.2023.103510
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    COVID-19 pandemic; China crude oil futures; Time-varying jump; Jump intensity;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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