Exploring the dynamic price discovery, risk transfer and spillover among INE, WTI and Brent crude oil futures markets: Evidence from the high‐frequency data

Abstract

In order to test whether Chinese crude oil futures (INE) has already played the role of futures market and whether it has had a significant impact on international benchmark market, we construct the permanent temporary model and Information Share model based on 15 min of high‐frequency trading data from March 26, 2018 to October 30, 2018 to inspect the proportions of new information in INE and Brent markets, and use the Garbade‐Silber model to measure the risk transfer effect. Furthermore, the generalised spillover index is proposed to examine the effects of return and volatility spillovers among INE, WTI and Brent futures markets. The results reveal that: firstly, during the sample period, INE is not yet a promoter of international benchmark crude oil prices, but more obvious followers. Secondly, although INE has begun to display the price discovery function, it is weaker than that of Brent, and the risk transfer function between them does not appear strong. Finally, INE market mainly acts as a net transmitter of return spillover before August 2018, but it has almost always been the net transmitter of volatility spillover during the full sample period. These findings are of interest to policy makers as well as investors for risk hedging and asset allocation of crude oil portfolios.

Macroeconomic Uncertainty and Crude Oil Futures Volatility–Evidence from China Crude Oil Futures Market

“…Both China's crude oil and Brent's crude oil comes mainly from the Middle East and North Africa, thus China's crude oil spot pricing mainly refers to the Brent crude oil price 4 . A previous study shows that China's crude oil market is more correlated with the Brent market compare with other major crude oil markets (Zhang and Ma, 2020), Yang et al (2020) shows that Brent markets have a unidirectional Granger causality relationship with the INE crude oil futures market. Furthermore, Antonakakis et al (2014) shows that there are spillover effects between oil prices changes and EPU index, Ma et al (2019) shows that the EPU from Europe, which including the United Kingdom., increases the volatility in Brent futures, which is the benchmark of the China's crude oil spot price.…”

Analysis of the Impact of COVID-19 Pandemic on the Intraday Efficiency of Agricultural Futures Markets

“…By using the pandemic declaration date, the intraday prices ranging from 1 August 2019 to 10 March 2020 refer to the period before the pandemic and prices from 11 March 2020 to 25 September 2020 form the sample for the period after announcing the pandemic. To overcome the problem of microstructure noise and duplicate values, the high-frequency data is aggregated into a 15 min frequency, which is the highest and best frequency and is in line with (Aslam et al 2021b;Chen et al 2022;Zhang and Ma 2021). Due to removal of the duplicate values and different number of trading days in different months, we have a different number of observations for these time periods.…”

Option features and price discovery in convertible bonds

“…The results showed that there are significant price discoveries in 11 contracts among 14 agricultural products. Zhang and Ma (2020) studied the price discovery of the crude oil market based on 15‐min high‐frequency data. These authors found that, although Chinese crude oil futures were beginning to show the function of price discovery, this was still weaker compared with Brent crude oil.…”