Tail Risks in Credit, Commodity, and Shipping Markets

Finance and Risk Management for International Logistics and the Supply Chain. Gong, S. & Cullinane, K. Amsterdam, Netherlands: Elsevier. 129-166 (2018)

Posted: 4 Nov 2018

See all articles by Dimitrios Gounopoulos

Dimitrios Gounopoulos

University of Bath

Nikos Paltalidis

Durham University Business School

Date Written: August 1, 2018

Abstract

We employ several copula functions to capture conditional and tail dependence during periods of extreme volatility and reverse conditions between shipping, financial, commodity and credit markets. We find that shocks in the shipping market coincide with dramatic changes in other markets and document the existence of extreme co-movements during severe financial conditions. Lower tail dependence exceeds conditional upper tail dependence, indicating that during periods of economic turbulence, dependence increases and the crisis spreads in a domino fashion, causing asymmetric contagion which advances during market downturns. In the post crisis period the level of dependence drops systematically and the shipping market becomes more pronouncedly heavy-tailed in downward moves. According to the estimated results accelerated decreases in commodities and prompt variations in volatility, provoke accelerated decreases and function as a barometer of shipping market fluctuations.

Keywords: Copulas, Tail risk, Contagion, Credit crisis, Commodities, Shipping

JEL Classification: C58, C32, F37, G15

Suggested Citation

Gounopoulos, Dimitrios and Paltalidis, Nikos, Tail Risks in Credit, Commodity, and Shipping Markets (August 1, 2018). Finance and Risk Management for International Logistics and the Supply Chain. Gong, S. & Cullinane, K. Amsterdam, Netherlands: Elsevier. 129-166 (2018). Available at SSRN: https://ssrn.com/abstract=3263756

Dimitrios Gounopoulos

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Nikos Paltalidis (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

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