Volatility contagion across commodity, equity, foreign exchange and Treasury bond markets

Abstract

Over the last years, the Chicago Board of Options Exchange (CBOE) has launched a set of implied volatility indices based on new asset classes following the success of equity-based volatility indices. Using some of the newly created volatility indices, this study shows that evidence of implied volatility transmission across commodity, equity, foreign exchange and Treasury bond markets cannot be accounted for by news announcements on economic fundamentals, suggesting volatility contagion. The findings are robust over the recent financial crisis period and the post-crisis period.

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