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Measuring the Volatility of Wheat Futures Prices on the LIFFE
Author(s) -
Dawson P. J.
Publication year - 2015
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/1477-9552.12092
Subject(s) - futures contract , volatility (finance) , economics , heteroscedasticity , econometrics , autoregressive model , autoregressive conditional heteroskedasticity , futures market , financial economics , volatility swap , monetary economics , implied volatility
Agricultural prices rose dramatically in 2007 and have subsequently fluctuated at high levels. This paper estimates the volatility of daily wheat futures prices on the Euronext/London International Financial Futures and Options Exchange for 1996–2012 using an exponential generalised autoregressive conditional heteroscedasticity model with a constant (price) elasticity of variance ( CEV ) and a broken trend. Results show that volatility is highly persistent; there is a structural break in volatility in June 2007 when volatility rose by 10%; subsequently, the wheat futures price has become more volatile; and the CEV is 0.04.