Stochastic Sequencing of Systemic Risk in Commodity Markets: Based on Geopolitical Risk Events Assessment

Chien‐Chiang Lee, Mengqi Li, Xiaoming Zhang and Peiru Wang

Journal of Futures Markets, 2025, vol. 45, issue 11, 2128-2150

Abstract: This paper proposes a model that combines the DCC‐GARCH‐CQR model with NIG distributions. Relying on the stochastic nature of CoVaR consistency rankings, we assess the risk contribution rankings of 21 major commodity futures to quantify the contribution of the commodity markets to systemic risk from the perspective of geopolitical tensions. The empirical findings suggest that geopolitical risks such as the Russian‐Ukrainian and Palestinian‐Israeli conflicts exacerbate systemic risk in commodities. It is worth noting that the impact of net spillovers differs across commodity sectors, especially for energy sector commodities such as WTI and gasoline, whose risk manifests as a critical factor in systemic risk. Conversely, gold is relatively less volatile in terms of sequencing and can serve as a better hedge. In addition, we find that downside losses in commodities have a greater impact on the stability of the financial system than upside gains.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:45:y:2025:i:11:p:2128-2150

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