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The dependence structure across oil, wheat, and corn: A wavelet-based copula approach using implied volatility indexes

Walid Mensi, Aviral Tiwari (), Elie Bouri (), David Roubaud and Khamis Al-Yahyaee ()

Energy Economics, 2017, vol. 66, issue C, 122-139

Abstract: This paper examines the dependence structure between three commodities implied volatility indexes (oil, wheat and corn) during bear, normal and bull markets and at different scales. For this purpose, we combine wavelet and copula methods to analyse the changes of the tail dependence at different scales or investment horizons. The results support evidence of time-varying asymmetric tail dependence between the pair of cereals as well as between oil and the two cereals at different time horizons – short-term horizon, medium term horizon and long term horizon, suggesting that the dependence structure is sensitive to time horizons. These results have important implications for the analysis of portfolio risk management.

Keywords: Commodity implied volatility; Dependence; Scale; Copula; Wavelet (search for similar items in EconPapers)
JEL-codes: C58 C63 F37 G11 G14 Q02 (search for similar items in EconPapers)
Date: 2017
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