Jump Spillover in Energy Futures Markets: The Bayesian Viewpoint

Abstract

In this paper, we investigate jump spillover effects between five energy (petroleum) futures. In order to identify the latent historical jumps of each energy futures, we use a Bayesian MCMC approach to estimate a jump-diffusion model on each energy futures. We examine the simultaneous jump intensities of pairs of energy futures and the probabilities that jumps in crude oil (and natural gas) cause jumps or usually large returns in other energy futures. In all cases, we find significant evidence of jump spillover.