The systemic risk of energy markets

Diane Pierret

No 2013018, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper investigates the meaning of systemic risk in energy markets and proposes a methodology to measure it. Energy Systemic Risk is defined by the risk of an energy crisis raising the prices of all energy commodities with negative consequences for the real economy. Measures of the total cost (EnSysRISK) and the net impact (ΔMES) of an energy crisis on the rest of the economy are proposed. The measures are derived from the Marginal Expected Shortfall (MES) capturing the tail dependence between the asset and the energy market factor. The adapted MES accounts for causality and dynamic exposure to common latent factors. The methodology is applied to the European Energy Exchange and the DAX industrial index, where a minor decline in industrial productivity is observed from recent energy shocks.

Keywords: energy crisis; factor models; marginal expected shortfall; market integration (search for similar items in EconPapers)
JEL-codes: C32 C58 Q43 (search for similar items in EconPapers)
Date: 2013-05-17
New Economics Papers: this item is included in nep-ene and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2013.html (application/pdf)

Related works:
Working Paper: The systemic risk of energy markets (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2013018

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().