Journal article
On the risk spillover across the oil market, stock market, and the oil related CDS sectors: A volatility impulse response approach
Energy economics, v 74, pp 813-827
Aug 2018
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Compared to Credit Default Swap (CDS) literature, this study focuses on the magnitude of volatility transmission and the risk spillover mechanism across the oil market, financial market risks, and the oil-related CDS sectors. Our dataset includes futures prices of West Texas Intermediate (WTI) and seven different measures of markets and credit risks. Four of the vast risk measures are the oil-related CDSs for auto, chemicals, natural gas, and utility sectors. In addition, three measures of the financial market risk, the one-month expected equity volatility measured by VIX, MOVE and SMOVE are included. The daily dataset covers the period from 6 January 2004 to 2 February 2016. The volatility transmission mechanism across the oil and financial markets and CDS sectors is examined using the volatility impulse response model. We evaluate the risk transmission due to several recent crisis shocks around the world and the results show complicated transmission mechanisms that spread over long periods. Among these events, the Lehman Brothers bankruptcy has destabilizing effects on all oil-related sectors. Findings also show that all oil market related shocks have significant risk transmission effects.
•We examine the volatility transmission mechanism using a multivariate conditional volatility model.•We investigated how major global events affect the volatility of the oil, oil-related and CDS markets.•We employ VIRF method based on a MGARCH model.•Lehman Brothers bankruptcy has destabilizing effects on all oil-related sectors.•Results show complicated transmission mechanisms that spread over long periods.
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Details
- Title
- On the risk spillover across the oil market, stock market, and the oil related CDS sectors: A volatility impulse response approach
- Creators
- Mehmet Balcilar - Eastern Mediterranean UniversityShawkat Hammoudeh - Drexel UniversityElif Akay Toparli - Eastern Mediterranean University
- Publication Details
- Energy economics, v 74, pp 813-827
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000445713500059
- Scopus ID
- 2-s2.0-85051108094
- Other Identifier
- 991019167829904721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics