Document de travail 2017-11
On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis
The paper investigates the dynamics of oil price volatility by examining interactions between the oil market and the US USD/EUR exchange rate. To this end, we use recent intradaily data to measure realised volatility and to investigate the instantaneous intradaily linkages between different types and proxies of oil price and US$/euro volatilities. We specify the drivers of oil price volatility through a focus on extreme US$ exchange rate movements (intradaily jumps). Accordingly, we find a negative relationship between the US USD/EUR and oil returns, indicating that a US $ appreciation decreases oil price. Second, we note the presence of a volatility spillover from the US exchange market to the oil market. Interestingly, this spillover effect seems to occur through intradaily jumps in both markets.
Classification JEL : G15, C2.
Mots-clés : Oil price volatility, realised volatility, intradaily jumps, exchange rate, intradaily data, GARCH model.