NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Andrei Kirilenko

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Working Papers

March 2012Convective Risk Flows in Commodity Futures Markets
with Ing-Haw Cheng, Wei Xiong: w17921
This paper analyzes the joint responses of commodity futures prices and traders’ futures positions to changes in the VIX before and after the recent financial crisis. We find that while financial traders accommodate the needs of commercial hedgers in normal times, in times of distress, financial traders reduce their net long positions in response to an increase in the VIX causing the risk to flow to commercial hedgers. By exploiting a cross-section of traders, we provide micro-level evidence for a convective flow of risk from distressed financial traders to the ultimate producers of commodities in the real economy.

Contact and additional information for this authorAll publicationsWorking Papers only

 
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