IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Convective Risk Flows in Commodity Futures Markets

  • Ing-Haw Cheng
  • Andrei Kirilenko
  • Wei Xiong

This 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w17921.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17921.

as
in new window

Length:
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:nbr:nberwo:17921
Note: AP CF
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
  2. Jon Danielsson & Hyun Song Shin & Jean-Pierre Zigrand, 2011. "Balance Sheet Capacity and Endogenous Risk," FMG Discussion Papers dp665, Financial Markets Group.
  3. Frans A. de Roon & Theo E. Nijman & Chris Veld, 2000. "Hedging Pressure Effects in Futures Markets," Journal of Finance, American Finance Association, vol. 55(3), pages 1437-1456, 06.
  4. Büyükşahin, Bahattin & Robe, Michel A., 2014. "Speculators, commodities and cross-market linkages," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 38-70.
  5. Scott H. Irwin & Dwight R. Sanders, 2011. "Index Funds, Financialization, and Commodity Futures Markets," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 1-31.
  6. John H. Cochrane, 2011. "Presidential Address: Discount Rates," Journal of Finance, American Finance Association, vol. 66(4), pages 1047-1108, 08.
  7. Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993. " Risk Management: Coordinating Corporate Investment and Financing Policies," Journal of Finance, American Finance Association, vol. 48(5), pages 1629-58, December.
  8. Zhiguo He & In Gu Khang & Arvind Krishnamurthy, 2010. "Balance Sheet Adjustments during the 2008 Crisis," IMF Economic Review, Palgrave Macmillan, vol. 58(1), pages 118-156, August.
  9. Zhiguo He & In Gu Khang & Arvind Krishnamurthy, 2010. "Balance Sheet Adjustments in the 2008 Crisis," NBER Working Papers 15919, National Bureau of Economic Research, Inc.
  10. Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and leverage," Staff Reports 328, Federal Reserve Bank of New York.
  11. Bessembinder, Hendrik, 1992. "Systematic Risk, Hedging Pressure, and Risk Premiums in Futures Markets," Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 637-67.
  12. John H. Cochrane, 2011. "Discount Rates," NBER Working Papers 16972, National Bureau of Economic Research, Inc.
  13. Albert S. Kyle, 2001. "Contagion as a Wealth Effect," Journal of Finance, American Finance Association, vol. 56(4), pages 1401-1440, 08.
  14. David Hirshleifer, 1988. "Residual Risk, Trading Costs, and Commodity Futures Risk Premia," Review of Financial Studies, Society for Financial Studies, vol. 1(2), pages 173-193.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17921. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.