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Extreme risk spillover between crude oil price and financial factors

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  • Zhao, Wan-Li
  • Fan, Ying
  • Ji, Qiang

Abstract

This paper uses the connectedness network model to analyze the risk spillover between WTI returns and 8 important financial factors in extreme risk scenarios. The findings show that WTI behaves as a net risk receiver in the risk spillover network, while the Financial Stress Index (FSI), non-commercial short and long positions in crude oil futures (NCS, NCL) are the biggest net risk transmitters. The dynamic results indicate that total connectedness degree presents time-varying characteristics and increased sharply during the financial crisis. The NCS and NCL's risk spillover to WTI increased since 2016 due to the financialization of commodity markets.

Suggested Citation

  • Zhao, Wan-Li & Fan, Ying & Ji, Qiang, 2022. "Extreme risk spillover between crude oil price and financial factors," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003457
    DOI: 10.1016/j.frl.2021.102317
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    7. Tian, Maoxi & Alshater, Muneer M. & Yoon, Seong-Min, 2022. "Dynamic risk spillovers from oil to stock markets: Fresh evidence from GARCH copula quantile regression-based CoVaR model," Energy Economics, Elsevier, vol. 115(C).

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