Risk implications of dependence in the commodities: A copula-based analysis

Prachi Jain and Debasish Maitra

Global Finance Journal, 2023, vol. 57, issue C

Abstract: The study aims to quantify the risk between oil and a broad sample of commodities using copulae tools to model the dependence structures. Using daily returns of commodity futures from October 3, 2005, to January 21, 2022, we find that in contrast with conventional wisdom, a C-Vine outperforms D- and R-Vine in modeling the multivariate dependence structure among commodities. We then compare the efficiency of copula-based models against traditional models in forecasting the portfolio and systemic risk in the commodities sector. The findings suggest that copula-based models are more effective than traditional models in forecasting portfolio and systemic risk.

Keywords: Commodity; Copulae; Portfolio; Systemic risk (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:57:y:2023:i:c:s1044028323000546

DOI: 10.1016/j.gfj.2023.100859

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