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Volatility linkages between energy and agricultural commodity prices

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  • López Cabrera, Brenda
  • Schulz, Franziska

Abstract

In this paper we investigate price and volatility risk originating in linkages between energy and agricultural commodity prices in Germany and study their dynamics over time. We propose an econometric approach to quantify the volatility and correlation risk structure, which has a large impact for investment and hedging strategies of market participants as well as for policy makers. Volatilities and their short and long run linkages (spillovers) are analyzed using a dynamic conditional correlation GARCH model as well as a multivariate multiplicative volatility model. Our approach provides a flexible and accurate fitting procedure for volatility and correlation risk.

Suggested Citation

  • López Cabrera, Brenda & Schulz, Franziska, 2013. "Volatility linkages between energy and agricultural commodity prices," SFB 649 Discussion Papers 2013-042, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2013-042
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    More about this item

    Keywords

    Energy; Agriculture; Biodiesel; Commodities; Interdependencies; Volatility Spillovers;
    All these keywords.

    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
    • Q59 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Other

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