Systemic risk in market microstructure of crude oil and gasoline futures prices: A Hawkes flocking model approach

Abstract

We propose the Hawkes flocking model that assesses systemic risk in high‐frequency processes at the two perspectives—endogeneity and interactivity. We examine the futures markets of West Texas Intermediate (WTI) crude oil and gasoline for the past decade, and perform a comparative analysis with conditional value‐at‐risk as a benchmark measure. In terms of high‐frequency structure, we derive the empirical findings. The endogenous systemic risk in WTI was significantly higher than that in gasoline, and the level at which gasoline affects WTI was constantly higher than that in the opposite case. Moreover, although the relative influence's degree was asymmetric, its difference has gradually reduced.