Associate Professor Xianming Sun, Executive Deputy Director of the Base, has published a collaborative paper titled "Modeling extreme risk spillovers between crude oil and Chinese energy futures markets"  in Energy Economics.

Abstract:

This paper aims to model the extreme risk spillovers between crude oil and Chinese energy futures markets to assess the effect of excessive oil price volatility on Chinese energy sectors. To this end, we set up a Generalized Autoregressive Conditional Heteroskedasticity - Extreme Value Theory Value-at-Risk specification (or GARCH-EVT-VaR hereafter) to flexibly model extreme risks. Moreover, we focus on two international crude oil futures markets and ten Chinese energy futures markets to measure the extreme risk spillovers. Our findings point to two main results. First, we find significant evidence of extreme risk spillovers from the two international crude oil markets to Chinese energy futures markets, which are asymmetric. More specifically, the spillover effects across extreme risks are more significant than those measured with the return series. Second, some Chinese energy future markets also exhibit internal extreme risk spillovers from the petrochemical sector to the coal sector. These findings reveal the potential vulnerability of Chinese energy sectors and call for active risk management policies to better hedge Chinese energy futures markets against extreme events.

Keywords: Connectedness; Network analysis; Energy futures markets; Extreme risk spillovers

Link：https://doi.org/10.1016/j.eneco.2023.107007

Teacher Profile

Xianming Sun, Ph.D., Executive Deputy Director of Innovation and Talent Base for Digital Technology and Finance, associate professor of Financial Engineering Department, Zhongnan University of Economics and Law, and master tutor. He was awarded as "Chutian Student" of Hubei Province and "Wenlan Young Scholar" of Zhongnan University of Economics and Law. His research interests include Financial Engineering, Financial Technology and related fields. He has published more than 10 papers in important academic journals such as the Journal of Economic Dynamics and Control, Journal of Futures Markets, Journal of Computational and Applied Mathematics, Computational Economics, Statistics and Probability Letters. He is currently leading research projects such as the National Natural Science Foundation of China and the Basic Research Funds of Central universities. The related research has won the Excellent Paper Award of the 16th China Financial Engineering Annual Conference (2017).