Systemic risk in energy derivative markets: a graph theory analysis

Delphine Lautier (1) , Franck Raynaud (1)

1 DRM - Dauphine Recherches en Management

This article uses graph theory to provide novel evidence regarding market integration, a favorable condition for systemic risk to appear in. Relying on daily futures returns covering a 12-year period, we examine cross- and inter-market linkages, both within the commodity complex and between commodities and other financial assets. In such a high dimensional analysis, graph theory enables us to understand the dynamic behavior of our price system. We show that energy markets - as a whole - stand at the heart of this system. We also establish that crude oil is itself at the center of the energy complex. Further, we provide evidence that commodity markets have become more integrated over time.

Mots clés: Systemic risk; Energy; Derivative markets; High dimensional analysis; Graph theory; Minimum spanning trees.; Minimum spanning trees

Domaines: Economies et finances

Delphine Lautier, Franck Raynaud. Systemic risk in energy derivative markets: a graph theory analysis. Energy Journal, 2012, 33 (6), pp.215-239. ⟨halshs-00738201⟩