Dynamic Correlation, Volatility Spillover Inside UK Capital Markets

By evaluating spot and futures markets, we quantify the dynamic correlation and volatility spillovers in the UK internal capital markets. Our results fill in the investigation of intra-capital market conditions during the epidemic period. Firstly, we calculate their dynamic correlation coefficients using VAR-DCC. Secondly, we figure out the hedging ratio using VAR-BEKK. The results show that the UK equity index is highly correlated with the futures index and has a significant volatility spillover effect, that the hedge ratio for the UK internal capital market is approximately 0.91202 and that the UK equity futures market is a good hedge against equity market risk. Finally, we further discuss the results of the analysis, the results of which are beneficial to relevant investors in the financial markets, and plan for further in-depth research.