Title: Understanding volatility and leverage effects in bunker markets

Authors: Ishita Ranjan; T. Bangar Raju; R. Jayaraj; Krishnendu Dutta

Addresses: Glencore India Private Limited, Prabhadevi, Mumbai, Maharashtra, India ' School of Business, University of Petroleum and Energy Studies, Dehradun, Uttarakhand, India ' School of Business, University of Petroleum and Energy Studies, Dehradun, Uttarakhand, India ' 310, Sector 28, Gurgaon, Haryana 122009, India

Abstract: The research analysed the volatility and the leverage effect in the bunker prices in IFO 380 and IFO 180 grades. Limited studies were found on bunker prices using EGARCH and bivariate analysis. The research investigated the causal relationships between IFO 380 and IFO 180 grades of bunkers. Serial correlations were found through using Lagrange multiplier (LM test) and heteroskedastic tests in the bunker price data. The analysis exhibited the model to be highly significant at 1%. Both the grades showed the short and long-run shocks and a positive leverage effect. The recommendations were made to the maritime industry to strategise during the long run and short-run shocks of bunker markets.

Keywords: bunker prices; bunker grades; IFO 380; IFO 180; E-GARCH; bivariate analysis; leverage effect; hedging strategies; Lagrange multiple tests; heteroskedasticity tests.

DOI: 10.1504/IJGEI.2018.092310

International Journal of Global Energy Issues, 2018 Vol.41 No.1/2/3/4, pp.158 - 175

Received: 07 Apr 2017
Accepted: 17 Oct 2017
Published online: 14 Jun 2018 *

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