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The systemic risk of energy markets

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  • Pierret, D.

Abstract

This paper investigates the meaning of systemic risk in energy markets and proposes a methodology to measure it. Energy Systemic Risk is defined by the risk of an energy crisis raising the prices of all energy commodities with negative consequences for the real economy. Measures of the total cost (EnSysRISK) and the net impact (ΔMES) of an energy crisis on the rest of the economy are proposed. The measures are derived from the Marginal Expected Shortfall (MES) capturing the tail dependence between the asset and the energy market factor. The adapted MES accounts for causality and dynamic exposure to common latent factors. The methodology is applied to the European Energy Exchange and the DAX industrial index, where a minor decline in industrial productivity is observed from recent energy shocks.
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  • Pierret, D., 2013. "The systemic risk of energy markets," LIDAM Discussion Papers ISBA 2013061, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvad:2013061
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    3. Fianu, Emmanuel Senyo & Ahelegbey, Daniel Felix & Grossi, Luigi, 2022. "Modeling risk contagion in the Italian zonal electricity market," European Journal of Operational Research, Elsevier, vol. 298(2), pages 656-679.
    4. Dao, Nguyen Thang & Dávila, Julio, 2013. "Can geography lock a society in stagnation?," Economics Letters, Elsevier, vol. 120(3), pages 442-446.
    5. Gustave Laurent, 2015. "A New Regulatory Paradigm for Over-the-Counter Oil Forward Contracts," Economic Affairs, Wiley Blackwell, vol. 35(2), pages 299-305, June.
    6. Christophe Bravard & Sudipta Sarangi & ANA MAULEON & JOSE J. SEMPERE-MONERRIS & VINCENT VANNETELBOSCH, 2016. "Contractually Stable Alliances," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(2), pages 212-225, April.
    7. Algieri, Bernardina & Leccadito, Arturo, 2017. "Wave after Wave: Contagion Risk from Commodity Markets," Discussion Papers 257801, University of Bonn, Center for Development Research (ZEF).
    8. Kerste, Marco & Gerritsen, Matthijs & Weda, Jarst & Tieben, Bert, 2015. "Systemic risk in the energy sector—Is there need for financial regulation?," Energy Policy, Elsevier, vol. 78(C), pages 22-30.
    9. Körner, Marc-Fabian & Sedlmeir, Johannes & Weibelzahl, Martin & Fridgen, Gilbert & Heine, Moreen & Neumann, Christoph, 2022. "Systemic risks in electricity systems: A perspective on the potential of digital technologies," Energy Policy, Elsevier, vol. 164(C).
    10. Olexandr Yemelyanov & Anastasiya Symak & Tetyana Petrushka & Roman Lesyk & Lilia Lesyk, 2018. "Evaluation of the Adaptability of the Ukrainian Economy to Changes in Prices for Energy Carriers and to Energy Market Risks," Energies, MDPI, vol. 11(12), pages 1-34, December.
    11. WANG, Kent & WANG, Shin-Huei & PAN, Zheyao, 2013. "Can federal reserve policy deviation explain response patterns of financial markets over time?," LIDAM Discussion Papers CORE 2013029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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