Volatility of Future Price on Spot prices of Food Commodities
I wish to investigate the effect of the trade of futures in the secondary market on spot prices. How the volatility produced in the future markets for Corn, Wheat, Rice, Palm Oil and Sugar impact on spot prices. I may consider just choosing 3, for the sake of time. Please advise on this.
I would like
Please find attached what has been proposed.
This is a response to the proposal:
“The objective of the proposal is to examine the effect of speculation (volatility in future prices) on spot food prices. The tools to be used are: (a) the Garch and the Spline Garch models and (b) Granger-Causality Tests.
I am familiar with the Garch and certain variants of it but not with Spline Garch. In any case, from what I see in the proposal, the Garch and/or the Spline Garch will be applied to a single time series (spot food prices). Therefore, from those two models one cannot get information on how volatility of spot prices is related to the volatility of future prices. To me, one should use bi- variate Garch models such as the BEKK and the DCC which are capable of p