Tail dependence structure and extreme risk spillover effects between the international agricultural futures and spot markets

This paper employs a combination of the Copula-CoVaR approach and the ARMA-GARCH-skewed Student-t model to investigate the tail dependence structure and extreme risk spillover effects between the international agricultural futures and spot markets, selecting four main agricultural commodities (soybean, maize, wheat, and rice) as examples. The empirical findings reveal that the tail dependence structures for the four futures-spot pairs are distinct and each of them exhibits a certain degree of asymmetry. Furthermore, the futures market for each agricultural commodity shows significant and robust extreme downside and upside risk spillover effects on the spot market. Notably, the downside risk spillover effects for both soybeans and maize are significantly stronger than their corresponding upside risk spillover effects, while there is no significant strength difference between the two risk spillover effects for wheat and rice. This study provides a theoretical basis for enhancing global food cooperation and maintaining global food security, and has practical significance for investors seeking to utilize agricultural commodities for risk management and portfolio optimization.