Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Bank of Finland Research Discussion Papers, Bank of Finland

No 26/2008:
The co-movements along the forward curve of natural gas futures: a structural view 

Fabrizio Spargoli () and Paolo Zagaglia ()

Abstract: This paper studies the co-movements between the daily returns of forwards on natural gas traded in the NYMEX with maturity of 1, 2 and 3 months. We identify a structural multivariate BEKK model using a recursive assumption whereby shocks to the volatility of the returns are transmitted from the short to the long section of the forward curve. We find strong evidence of spillover effects in the conditional first moments, for which we show that the transmission mechanism operates from the shorter to the longer maturity. In terms of reduced form conditional second moments, the shortest the maturity, the higher the volatility of the return, and the more the returns become independent from the others and follow the dynamics of the underlying commodity. The evidence from the structural second moments indicates that the longer the maturity is, the higher the uncertainty about the returns. We also show that the higher the structural variance of a maturity relative to that of another maturity, the stronger the correlation between the two.

Keywords: natural gas prices; forward markets; GARCH; structural VAR; (follow links to similar papers)

JEL-Codes: C32; G19; (follow links to similar papers)

32 pages, November 18, 2008

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

0826netti.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:bofrdp:2008_026 This page was generated on 2014-12-14 19:21:35