Commodity Tail Risks

Journal of Futures Markets, Forthcoming

45 Pages Posted: 23 Sep 2022

See all articles by Manuel Ammann

Manuel Ammann

University of St. Gallen - School of Finance

Mathis Moerke

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management; University of Reading - ICMA Centre

Christoph Wuersig

Leibniz Universität Hannover - Faculty of Economics and Management

Date Written: September 13, 2022

Abstract

In this study, we investigate the cross-section of option implied tail risks in commodity markets. In contrast to findings from equity markets, left and right tail risk implied by option markets are both large. Commodity specific variables exert the largest influence on tail risk, while there is no evidence of systematic commodity factors that are linked to tail risk. Additionally, we find strong links to the equity markets, but also co-movements to macroeconomic factors. Left or right tail risks are largely independent of variance risk premiums. Finally, both left and right tail risk are priced in the cross-section of commodity futures returns.

Keywords: Commodities, Tail Risks, Dependencies

JEL Classification: G10, G17, G12, C58

Suggested Citation

Ammann, Manuel and Moerke, Mathis and Prokopczuk, Marcel and Wuersig, Christoph, Commodity Tail Risks (September 13, 2022). Journal of Futures Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4217446

Manuel Ammann

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Mathis Moerke (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, CH-9000
Switzerland

HOME PAGE: http://www.mathismoerke.com

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St. Gallen, 9000
Switzerland

Marcel Prokopczuk

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Christoph Wuersig

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

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