Do spillover effects between crude oil and natural gas markets disappear? Evidence from option markets

This study investigates the volatility relationship between crude oil and natural gas markets from 2007 to 2015. Particularly, we focus on implied volatility and provide evidence from both call and put options. In general, we find that there are no volatility dependencies between these two markets after 2007, which is consistent with price independencies documented in Batten et al. (2017). However, we observe significant causality relations from oil to gas in put options in a minority of our sample. Further, the causalities can be decomposed into short-term and long-term relations, which might be explained by a series of influential events.