Price co-movement and the crack spread in the US futures markets

Panos Fousekis*, Vasilis Grigoriadis

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

The strength and the pattern of linkages between output and input futures prices are of particular importance for risk management in the energy sector. This paper investigates the co-movement between crude oil, heating oil, and reformulated gasoline futures prices using non-parametric and time-varying copulas. The empirical results suggest that short-run co-movement is high, symmetric with respect to the sign of shocks, and asymmetric with respect to the size of them. Depending on the source of a shock, the asymmetry with respect to size is likely to work towards widening or narrowing the crack spread. In the long run, however, price co-movement becomes perfect, and the price interrelationships obey the Law of One Price.

Original languageEnglish
Pages (from-to)57-71
Number of pages15
JournalJournal of Commodity Markets
Volume7
Early online date25 Aug 2017
DOIs
Publication statusPublished - Sep 2017
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2017

Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.

Keywords

  • Co-movement
  • Copulas
  • Crude oil
  • Futures prices
  • Gasoline
  • Heating oil

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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