Tail risk, systemic risk and spillover risk of crude oil and precious metals

Rizwan Ahmed, Sajid M. Chaudhry, Chamaiporn Kumpamool, Chonlakan Benjasak*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


The relationship between oil prices and metal prices has been extensively investigated. However, the tail risk, systemic risk and spillover risk of oil prices have not been investigated via extreme value theory (EVT). We use this novel approach to determine the tail risk of oil, precious metals, how much risk they pose to the financial system and to what extent a shock in oil prices spill over to other precious metals as well as from the financial system. We use long time series of daily data from 1st January 1987 to 31st December 2021 as long time series is required for the EVT. The data is based on the total return index (RI) of four precious metals including gold, platinum, palladium and silver. Our results show that the tail risk of these metals is lower during the crisis period except the Covid-19 pandemic crisis. Most importantly, gold is a safer asset due to the lowest tail risk among four precious metals, indicating the claim that gold is a precious asset to mitigate the returns during market downturns and acts as a ‘safe haven’. Moreover, we also find that extreme systemic risk (tail-β) for crude oil and selected precious metals reduces during crisis period. This is also recognising the fact that these commodities act as a prospective asset for portfolio diversification to hedge against financial assets' volatility. Finally, the spillover risk among crude oil and selected precious metals varies over time, especially during the crisis period and crude oil is an important stimulator of the spillover risk for precious metals. By using our findings, financial market investors can improve their investment planning to attain the maximum advantage of portfolio diversification. Financial managers can further apply these results in forecasting to estimate future global oil market trends for improving their hedging skills and portfolio performance.

Original languageEnglish
Article number106063
JournalEnergy Economics
Early online date13 May 2022
Publication statusPublished - Aug 2022

Bibliographical note

© 2022 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license 4.0


  • Crude oil and tail risk
  • Precious metals
  • Risk management


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