The Effect of Jumps in the Crude Oil Market on the Sovereign Risks of Major Oil Exporters
Abstract
:1. Introduction
2. Research Background
3. Data Description
4. Methodology
4.1. Testing for Jumps
4.2. Studying the Effect of Oil Price/Volatility Jumps on the Jumps in Sovereign CDS Spreads
5. Results and Discussion
5.1. Results for Jumps
5.2. Results of the Effect of Oil Price/Volatility Jumps on the Jumps in Sovereign CDS Spreads
6. Concluding Remarks
Funding
Conflicts of Interest
Appendix A
References
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1 | Empirical evidence suggests that lower oil prices can shape energy export revenues, government expenditure, and fiscal balances of oil dependent economies (see, among others, El Anshasy and Bradley 2012). |
2 | The choice of these five countries and two emirates is determined by the availability of sovereign CDS data. Unfortunately, the daily CDS spreads of Saudi Arabia and Qatar are very illiquid. |
3 | Since both CDS spreads and oil implied volatility are measured in percentage points or basis points, taking ‘ordinary’ first differences should be sufficient. |
4 | This test is quite similar to the non-parametric tests of Lee and Mykland (2008). |
5 | Our estimated results are not sensitive to the choice between the AR-GJR-GARCH and AR-GARCH models. |
6 | The lack of relationships between the price discontinuities of crude oil prices and CDS spreads of major oil exporters allows us to give some insights about diversifying the risk of jumps between the two variables. In fact, evidence that jumps of crude oil prices and CDS spreads are unrelated represent good news to investors who may use crude oil prices as a diversifier of the jump risk of sovereign CDS spreads. |
Mean | Max. | Min. | Std. Dev. | Skewness | Kurtosis | Jarque−Bera | ADF | ARCH−LM | |
---|---|---|---|---|---|---|---|---|---|
Russia | −0.2498 | 53.5100 | −97.2901 | 7.4111 | −1.0608 | 23.6017 | 39,461.4400 * | −34.3647 * | 40.5793 * |
Brazil | −0.1832 | 50.7300 | −87.6445 | 6.5425 | −0.8794 | 24.0722 | 41,136.0600 * | −23.4194 * | 46.0921 * |
South Africa | −0.1183 | 23.6900 | −29.6400 | 5.0663 | −0.1866 | 6.2264 | 970.5268 * | −43.0916 * | 16.1933 * |
Abu Dhabi | −0.0639 | 9.3220 | −9.9340 | 1.0682 | −0.3654 | 20.8106 | 29,233.0500 * | −13.2021 * | 25.9077 * |
Dubai | −0.1707 | 34.7021 | −29.3401 | 3.1042 | −0.5036 | 29.8879 | 66,605.3700 * | −28.5041 * | 29.7821 * |
Kazakhstan | −0.1471 | 30.1299 | −39.6802 | 4.5298 | −0.3234 | 15.7128 | 14,907.1200 * | −28.5323 * | 37.1288 * |
Mexico | −0.0742 | 18.1580 | −24.4300 | 3.6999 | −0.0779 | 6.6018 | 1195.7460 * | −44.4872 * | 30.7181 * |
OVX | −0.1852 | 22.9802 | −18.1006 | 4.0862 | 0.2113 | 4.6277 | 260.1770 * | −47.3986 * | 22.0334 * |
Crude oil | −0.0171 | 9.8968 | −8.2373 | 1.9198 | 0.2071 | 5.9391 | 748.3891 * | −43.9739 * | 17.2372 * |
Russia | Brazil | South Africa | Abu Dhabi | Dubai | Kazakhstan | Mexico | OVX | |
---|---|---|---|---|---|---|---|---|
Russia | 1 | |||||||
Brazil | 0.3606 | 1 | ||||||
South Africa | 0.5240 | 0.5101 | 1 | |||||
Abu Dhabi | 0.2777 | 0.2084 | 0.4211 | 1 | ||||
Dubai | 0.3369 | 0.1940 | 0.3852 | 0.5861 | 1 | |||
Kazakhstan | 0.5016 | 0.2894 | 0.5120 | 0.4449 | 0.5252 | 1 | ||
Mexico | 0.4349 | 0.7462 | 0.5874 | 0.3118 | 0.3183 | 0.4146 | 1 | |
OVX | 0.1854 | 0.2268 | 0.2472 | 0.1430 | 0.1468 | 0.1986 | 0.3027 | 1 |
Crude oil | −0.0893 | 0.0083 | −0.0257 | −0.1009 | −0.0849 | −0.0933 | −0.0093 | 0.0464 |
Russia | Brazil | South Africa | Abu Dhabi | Dubai | Kazakhstan | Mexico | OVX | Crude Oil | ||
---|---|---|---|---|---|---|---|---|---|---|
Panel A: Number of jumps | Sum | |||||||||
2011 | 3 | 2 | 2 | 12 | 9 | 4 | 4 | 8 | 2 | 46 |
2012 | 5 | 4 | 3 | 21 | 17 | 3 | 1 | 1 | 0 | 55 |
2013 | 7 | 7 | 7 | 17 | 36 | 4 | 4 | 5 | 0 | 87 |
2014 | 9 | 1 | 1 | 19 | 34 | 10 | 3 | 4 | 3 | 84 |
2015 | 8 | 2 | 2 | 33 | 37 | 11 | 0 | 3 | 2 | 98 |
2016 | 2 | 6 | 5 | 26 | 27 | 5 | 4 | 2 | 1 | 78 |
2017 | 3 | 4 | 3 | 25 | 32 | 11 | 1 | 2 | 2 | 83 |
2018 | 4 | 2 | 3 | 14 | 23 | 19 | 6 | 2 | 4 | 77 |
2019 | 2 | 4 | 3 | 11 | 3 | 7 | 3 | 2 | 4 | 39 |
Sum | 43 | 32 | 29 | 178 | 218 | 74 | 26 | 29 | 18 | 647 |
Panel B: % of days with jumps | ||||||||||
2011 | 0.14% | 0.09% | 0.09% | 0.54% | 0.41% | 0.18% | 0.18% | 0.36% | 0.09% | |
2012 | 0.23% | 0.18% | 0.14% | 0.95% | 0.77% | 0.14% | 0.05% | 0.05% | 0.00% | |
2013 | 0.32% | 0.32% | 0.32% | 0.77% | 1.63% | 0.18% | 0.18% | 0.23% | 0.00% | |
2014 | 0.41% | 0.05% | 0.05% | 0.86% | 1.54% | 0.45% | 0.14% | 0.18% | 0.14% | |
2015 | 0.36% | 0.09% | 0.09% | 1.49% | 1.68% | 0.50% | 0.00% | 0.14% | 0.09% | |
2016 | 0.09% | 0.27% | 0.23% | 1.18% | 1.22% | 0.23% | 0.18% | 0.09% | 0.05% | |
2017 | 0.14% | 0.18% | 0.14% | 1.13% | 1.45% | 0.50% | 0.05% | 0.09% | 0.09% | |
2018 | 0.18% | 0.09% | 0.14% | 0.63% | 1.04% | 0.86% | 0.27% | 0.09% | 0.18% | |
2019 | 0.09% | 0.18% | 0.14% | 0.50% | 0.14% | 0.32% | 0.14% | 0.09% | 0.18% | |
Total % | 1.95% | 1.45% | 1.31% | 8.06% | 9.87% | 3.35% | 1.18% | 1.31% | 0.82% |
Russia | Brazil | South Africa | Abu Dhabi | Dubai | Kazakhstan | Mexico | OVX | |
---|---|---|---|---|---|---|---|---|
Russia | 1 | |||||||
Brazil | 0.3432 | 1 | ||||||
South Africa | 0.5300 | 0.4663 | 1 | |||||
Abu Dhabi | 0.2807 | 0.1690 | 0.3399 | 1 | ||||
Dubai | 0.2907 | 0.1417 | 0.3008 | 0.5107 | 1 | |||
Kazakhstan | 0.5011 | 0.2760 | 0.4757 | 0.3986 | 0.4113 | 1 | ||
Mexico | 0.4237 | 0.7293 | 0.5312 | 0.2371 | 0.2280 | 0.3397 | 1 | |
OVX | 0.1281 | 0.1798 | 0.1977 | 0.0916 | 0.0705 | 0.1170 | 0.2215 | 1 |
Crude oil | −0.0773 | 0.0075 | −0.0232 | −0.0989 | −0.0808 | −0.0871 | −0.0032 | 0.0327 |
Jumps-Oil Price at Time t−1 | Jumps-OVX at Time t−1 | |
---|---|---|
Jumps-Russia | −0.7823 | 1.2189 *** |
Jumps-Brazil | −0.3288 | 0.8072 ** |
Jumps-South Africa | −0.1293 | 0.6879 ** |
Jumps-Abu Dhabi | −0.4193 | 0.8410 ** |
Jumps-Dubai | −0.1872 | 0.3932 |
Jumps-Kazakhstan | 0.4321 | 1.1297 ** |
Jumps-Mexico | 0.6803 | 1.0817 ** |
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Bouri, E. The Effect of Jumps in the Crude Oil Market on the Sovereign Risks of Major Oil Exporters. Risks 2019, 7, 118. https://doi.org/10.3390/risks7040118
Bouri E. The Effect of Jumps in the Crude Oil Market on the Sovereign Risks of Major Oil Exporters. Risks. 2019; 7(4):118. https://doi.org/10.3390/risks7040118
Chicago/Turabian StyleBouri, Elie. 2019. "The Effect of Jumps in the Crude Oil Market on the Sovereign Risks of Major Oil Exporters" Risks 7, no. 4: 118. https://doi.org/10.3390/risks7040118