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Measuring Financial Risk Co-movement in Commodity Markets

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Gema Fernández-Avilés

    (University of Castilla la Mancha)

  • Jose-María Montero

    (University of Castilla la Mancha)

  • Lidia Sanchis-Marco

    (University of Castilla la Mancha)

Abstract

Commodities play a more and more central role in financial markets. There are currently around fifty major commodity markets where more than a hundred hard and soft primary commodities are traded. Financialization has made purchasing index funds one of the most popular ways to invest on commodities. Consequently, understanding the dynamics of commodity indexes and whether or not they co-move becomes crucial for investors, especially in distress periods, where risk sharply increases. In this short paper, we analyze the downside risk co-movement of a number of primary commodity indexes in a distress period known as the 2007–2008 oil and food crisis. For this purpose, we use the expected shortfall and multidimensional scaling as a technique to produce low-dimensional financial risk maps.

Suggested Citation

  • Gema Fernández-Avilés & Jose-María Montero & Lidia Sanchis-Marco, 2018. "Measuring Financial Risk Co-movement in Commodity Markets," Springer Books, in: Marco Corazza & María Durbán & Aurea Grané & Cira Perna & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 341-344, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-89824-7_61
    DOI: 10.1007/978-3-319-89824-7_61
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