Nonlinear examination of the 'Heat Wave' and 'Meteor Shower' effects between spot and futures markets of the precious metals.

This paper researches two volatility transmission phenomena that take place within ('heat wave') and between ('meteor shower') spot and futures markets of four precious metals-gold, silver, platinum and palladium. We create conditional volatilities by considering three types of Markov switching GARCH models in combination with three different distribution functions. Conditional volatilities are subsequently embedded in Markov switching mean model.