( ISSN 2277 - 9809 (online) ISSN 2348 - 9359 (Print) ) New DOI : 10.32804/IRJMSH

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VOLATILITY DYNAMICS OF METAL CONTRACTS

    1 Author(s):  BHARAT BHATT

Vol -  10, Issue- 1 ,         Page(s) : 624 - 631  (2019 ) DOI : https://doi.org/10.32804/IRJMSH

Abstract

This paper attempts to capture the volatility dynamics of spot and future base metal contracts. Copper and aluminum are two important metals used widely by industry. Copper and aluminum are traded on commodity exchange for price discovery and risk transfer. Commodity derivative markets are often blamed that this causes volatility in the spot market. EGARCH is used to examine the volatility dynamics. The results indicate that both ARCH term and GARCH term was significant for both the contract. This indicates the volatility spillover from the future to the spot market. GARCH term is higher than ARCH term indicates that past innovation in the future market has more impact on spot price volatility. EGARCH is positive and significant in the case of aluminum indicating that positive news has more effect. The study has the limitation that only two commodities are examined for empirical examination.

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