Systemic risk in energy derivative markets: a graph theory analysis

Delphine Lautier () and Franck Raynaud
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Delphine Lautier: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Franck Raynaud: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article uses graph theory to provide novel evidence regarding market integration, a favorable condition for systemic risk to appear in. Relying on daily futures returns covering a 12-year period, we examine cross- and inter-market linkages, both within the commodity complex and between commodities and other financial assets. In such a high dimensional analysis, graph theory enables us to understand the dynamic behavior of our price system. We show that energy markets - as a whole - stand at the heart of this system. We also establish that crude oil is itself at the center of the energy complex. Further, we provide evidence that commodity markets have become more integrated over time.

Keywords: Systemic risk; Energy; Derivative markets; High dimensional analysis; Graph theory; Minimum spanning trees.; Minimum spanning trees (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ene and nep-rmg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00738201v1
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Citations: View citations in EconPapers (30)

Published in Energy Journal, 2012, 33 (6), pp.215-239

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00738201

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