A note on the implied volatility spillovers between gold and silver markets

While a large number of studies estimate the volatility spillover effects between gold and silver returns, none of them employs the implied volatilities of these two metal markets to assess such uncertainty transmission relationship. Our paper aims to fill this void in the existing literature. At the empirical stage, we make use of two different forms of the bivariate VAR-GARCH model to investigate the implied volatility spillovers between gold and silver markets. Our findings suggest that return and shocks significantly run from gold VIX (GVZ) to silver VIX (VXSLV), but not the other way around. In addition, we show that portfolio risk can be diversified if investors hold options in both gold and silver markets. Our findings are robust with respect to various VAR-GARCH models used in the empirical investigation.