Commodity Tail Risks
Journal of Futures Markets, Forthcoming
45 Pages Posted: 23 Sep 2022
Date Written: September 13, 2022
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: Suggested Citation