Research On The Risk Spillover Effects Of Non-ferrous Metals Futures Markets At Home And Abroad Based On The Copula Method

Economic globalization makes the risk in financial markets spread faster and faster,and also more and more strong.However,the risk transfer presents non-normal,nonlinear and asymmetric characters.Copula function can capture nonlinear relation and tail relation of variables more accurately.So Copula method has an unique advantage in research on the risk spillover between the financial markets.Non-ferrous metals are the mature futures varieties in commodity futures markets in the world.The main varieties,including copper,aluminum,lead,zinc,nickel,aluminum alloy,etc.,mainly concentrated in the London Metal Exchange,the New York Mercantile Exchange,and the Tokyo Commodity Exchange.Especially,London Metal Exchange has acceptable trading pricing standard in the non-ferrous metals.China is a large country of non-ferrous metal production and consumption,and non-ferrous metal futures trading is active and occupies an important position in the domestic futures market.In recent years,with the increasing opening degree of China’s financial markets,the correlation between domestic and foreign futures markets is closer and closer.Therefore,it is very important to study the spillover effect between non-ferrous metal futures markets at home and abroad,which is especially important.This paper chooses Shanghai non-ferrous metals index(IMCI),copper,aluminum,lead and zinc in Shanghai Futures Exchange as the objects to study,and London Metal Exchange base metals index,LME copper,LME aluminium,LME lead and LME zinc as the abroad objects to analysis the risk spillover effect of non-ferrous metal futures markets at home and abroad.One of the characteristics of this study is that the analysis of futures markets is across different countries,in order to explore the dynamic characteristics of the domestic and foreign non-ferrous metal futures markets.At the same time,the empirical analysis is based on the latest research data,which has more realistic significance.In this paper,using the softwares of Eviews8.0 and MatlabR2014a,an optimal Copula connect model is constructed to fit the domestic non-ferrous metals futures market and foreign non-ferrous metals futures market,and to determine the edge distribution function by comparing the size of the square Euclidean distance.Furtherly,the risk overflow value CoVaR and the risk overflow rate%CoVaR are calculated based on the method of Copula.The main results can be concluded as follows.Firstly,in domestic non-ferrous metal futures market,the aluminum has the biggest risk spillover effect on non-ferrous metals futures as a whole,and the lead is effected the greatest by the non-ferrous metals futures as a whole,namely has the weakest risk resistance.Secondly,when foreign non-ferrous metals futures market as a whole are in trouble,the risk spillover effects on demestic non-ferrous metal futures market is greater than the risk spillover of Chinese non-ferrous metal futures market to foreign market.Furtherly,the risk spillover effect on Shanghai copper and zinc are greater when foreign copper and zinc are in trouble.Therefore,regulators should strive to improve the risk prevention ability of Shanghai lead,and pay close attention to foreign copper and zinc varieties.In this paper,the non-ferrous metals futures market risk spillover effect is measured effectively from the size and the direction,it has an important practical significance on the effective supervision and sustainable development of non-ferrous metals futures market in China.