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Systemic risk in market microstructure of crude oil and gasoline futures prices: A Hawkes flocking model approach

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  • Hyun Jin Jang
  • Kiseop Lee
  • Kyungsub Lee

Abstract

We propose the Hawkes flocking model that assesses systemic risk in high‐frequency processes at the two perspectives—endogeneity and interactivity. We examine the futures markets of West Texas Intermediate (WTI) crude oil and gasoline for the past decade, and perform a comparative analysis with conditional value‐at‐risk as a benchmark measure. In terms of high‐frequency structure, we derive the empirical findings. The endogenous systemic risk in WTI was significantly higher than that in gasoline, and the level at which gasoline affects WTI was constantly higher than that in the opposite case. Moreover, although the relative influence's degree was asymmetric, its difference has gradually reduced.

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  • Hyun Jin Jang & Kiseop Lee & Kyungsub Lee, 2020. "Systemic risk in market microstructure of crude oil and gasoline futures prices: A Hawkes flocking model approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(2), pages 247-275, February.
    • Handle: RePEc:wly:jfutmk:v:40:y:2020:i:2:p:247-275
    DOI: 10.1002/fut.22048
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    Cited by:

    1. Lee Kyungsub, 2024. "Multi-kernel property in high-frequency price dynamics under Hawkes model," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 28(4), pages 605-624.
    2. Kyungsub Lee, 2022. "Application of Hawkes volatility in the observation of filtered high-frequency price process in tick structures," Papers 2207.05939, arXiv.org, revised Sep 2024.
    3. Choi, So Eun & Jang, Hyun Jin & Lee, Kyungsub & Zheng, Harry, 2021. "Optimal market-Making strategies under synchronised order arrivals with deep neural networks," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    4. Kyungsub Lee, 2023. "Multi-kernel property in high-frequency price dynamics under Hawkes model," Papers 2302.11822, arXiv.org.
    5. Ning Zhang & Yujing Gong & Xiaohan Xue, 2023. "Less disagreement, better forecasts: Adjusted risk measures in the energy futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(10), pages 1332-1372, October.
    6. Huszár, Zsuzsa R. & Kotró, Balázs B. & Tan, Ruth S.K., 2023. "Dynamic volatility transfer in the European oil and gas industry," Energy Economics, Elsevier, vol. 127(PA).

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