Convective Risk Flows in Commodity Futures Markets
AbstractThis paper analyzes the joint responses of commodity futures prices and traders’ futures positions to changes in the VIX before and after the recent financial crisis. We find that while financial traders accommodate the needs of commercial hedgers in normal times, in times of distress, financial traders reduce their net long positions in response to an increase in the VIX causing the risk to flow to commercial hedgers. By exploiting a cross-section of traders, we provide micro-level evidence for a convective flow of risk from distressed financial traders to the ultimate producers of commodities in the real economy.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17921.
Date of creation: Mar 2012
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Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Global Commodity Market
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-03 (All new papers)
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