The ICE Carbon (EUC) and Brent Oil Contracts: Volatility (Co-)Movements and Forecasts

Abstract

This research looks at the conditional mean and volatility densities for the nearest maturities of renewable Carbon and fossil Brent Oil Futures contracts. The primary goal is to characterize the features of volatility across commodity financial markets. Serial and cross-correlation are reported via a Kalman filter and the explicit volatility projection. The enhanced cross-lags should supplement available derivative trading strategies with step-ahead volatility information.