Tail Risk Connectedness in the Refined Petroleum Market: A First Look at the Impact of the COVID Pandemic

We use the conditional autoregressive value at risk (CAViaR) model in combination with time-varying parameter vector (TVP-VAR) based connectedness approach to study systematic tail transmission considering two types of crude oil (Brent and WTI) also four refined petroleum products prices (gasoline, heating oil, jet fuel propane) from January, 17, 1997 December 11, 2020. For robustness purposes, we utilise three commonly used VaR probability cut-off points; that is, 10%, 5% 2.5%. The selected sample period covers first stage recent COVID-19 pandemic crisis. Results show that, both kerosene are persistent net transmitters uncertainty episodes network, signifying importance liquidity relevant markets. In addition, role measures appears shift around 2009 following developments energy market. Overall, findings suggest rises major crisis have potential propel exposure losses levels akin those Global Financial Crisis 2007.