Extreme risk spillover between crude oil price and financial factors

Wan-Li Zhao, Ying Fan and Qiang Ji

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: This paper uses the connectedness network model to analyze the risk spillover between WTI returns and 8 important financial factors in extreme risk scenarios. The findings show that WTI behaves as a net risk receiver in the risk spillover network, while the Financial Stress Index (FSI), non-commercial short and long positions in crude oil futures (NCS, NCL) are the biggest net risk transmitters. The dynamic results indicate that total connectedness degree presents time-varying characteristics and increased sharply during the financial crisis. The NCS and NCL's risk spillover to WTI increased since 2016 due to the financialization of commodity markets.

Keywords: Crude oil price; financialization; market factors; connectedness network (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003457

DOI: 10.1016/j.frl.2021.102317

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