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<p>With the deepening of commodity financialization, the risk linkage between global commodity markets and financial markets becomes more complex. In this paper, we investigate the risk interconnections between global financial markets and commodity markets in the context of commodity financialization, as well as the dynamic infectious process. To describe and analyze the risk contagion process between the two markets, we construct a two-layer spillover network for the mixed markets. Based on the network, we analyze the static average spillover risk and the dynamic spillover risk of different countries and commodities. Moreover, we propose an SIS epidemic model to discuss the dynamic contagion procession of spillover risk in the system. By focusing on five extreme events, we find that the basic reproduction number is great than 1 at all stages and has obvious change before and after these events. In this model, the cross-contagion rate parameters between two markets can be positive or negative, indicating that the spillover risks between financial markets and commodity markets can both infect and hedge each other. This reflects the unique nature of financial risk contagion.</p>

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Risk contagion between global commodity and financial markets based on two-layer networks and SIS model

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年2月4日

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  • Yulian An,
  • Yi Wang

摘要

With the deepening of commodity financialization, the risk linkage between global commodity markets and financial markets becomes more complex. In this paper, we investigate the risk interconnections between global financial markets and commodity markets in the context of commodity financialization, as well as the dynamic infectious process. To describe and analyze the risk contagion process between the two markets, we construct a two-layer spillover network for the mixed markets. Based on the network, we analyze the static average spillover risk and the dynamic spillover risk of different countries and commodities. Moreover, we propose an SIS epidemic model to discuss the dynamic contagion procession of spillover risk in the system. By focusing on five extreme events, we find that the basic reproduction number is great than 1 at all stages and has obvious change before and after these events. In this model, the cross-contagion rate parameters between two markets can be positive or negative, indicating that the spillover risks between financial markets and commodity markets can both infect and hedge each other. This reflects the unique nature of financial risk contagion.