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Modelling Extreme Risks in Commodities and Commodity Currencies

Author

Listed:
  • Fernanda Fuentes

    (Universidad de Talca, Chile)

  • Rodrigo Herrera

    () (Universidad de Talca, Chile)

  • Adam Clements

    () (QUT)

Abstract

This paper analyzes extreme co-movements between the Australian and Canadian commodity currencies, and the gold and oil markets respectively, within a multivariate extension of the Hawkes-POT model. The intensity of extreme events in the Australian dollar are influenced by extreme events in gold, while the size of extreme events in the Canadian dollar are driven by extreme events in crude oil. Models with both self-excitation and cross-excitation produce the most accurate predictions of extreme risk in these markets. The results of this paper will provide participants in the commodity and currency markets a deeper understanding of the risks they face.

Suggested Citation

  • Fernanda Fuentes & Rodrigo Herrera & Adam Clements, 2016. "Modelling Extreme Risks in Commodities and Commodity Currencies," NCER Working Paper Series 115, National Centre for Econometric Research.
  • Handle: RePEc:qut:auncer:2016_06
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    File URL: http://www.ncer.edu.au/papers/documents/WP115.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Extreme risk; Co-movements; Multivariate Hawkes-POT; Point process; Value at Risk;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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