Commodity markets volatility transmission: Roles of risk perceptions and uncertainty in financial markets

Uncertainty and Risk in Financial Markets∗

This paper considers a general equilibrium model in which the distinction between uncertainty and risk is formalized by assuming agents have incomplete preferences over statecontingent consumption bundles, as in Bewley (1986). Without completeness, individual decision making depends on a set of probability distributions over the state space. A bundle is preferred to another if and only if it ha...

Volatility of Volatility of Financial Markets

We present empirical evidence for considering volatility of Eurodollar futures as a stochastic process, requiring a generalization of the standard Black-Scholes (BS) model which treats volatility as a constant. We use a previous development of a statistical mechanics of financial markets (SMFM) to model these issues. Ke ywords: options; eurodollar; volatility; statistical mechanics

Correlation in Volatility Among Related Commodity Markets

Related commodity markets have two characteristics: (i) they may follow similar volatility processes; and (ii) such markets are frequently represented by a market aggregate or index. Indices are used to represent the performance and time series properties of a group of markets. An important issue regarding the time series properties of an index is how it reflects the time series properties of i...

Volatility Transmission in Financial Markets: A New Approach

In this paper we suggest ways to characterize the transmission mechanisms of volatility between markets by making use of a new Markov Switching bivariate model where the state of one variable feeds into the transition probability of the state of the other. The comparison between this model and other Markov Switching models allows us to derive statistical tests stressing the role of one market r...

The Influence of Structural Changes in Volatility on Shock Transmission and Volatility Spillover among Iranian Gold and Foreign Exchange Markets