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
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: Suggested Citation
