Commodity Market Must Pay Attention to Event Risks, JPMCC Symposium Experts Say

by HOU XINTONG (Yicai Global) Sept. 3 — Affected by the recent Turkish crisis, copper prices have fallen into a bear market, and US crude oil has fallen to its lowest level in 10 weeks. Even gold, which is often regarded as a safe-haven asset, has also sharply fallen. So, what macro and micro factors that affect the commodities prices? Does the existing risk model fully consider all kinds of risks? The experts who attended the recently held 2nd J.P. Morgan Center for Commodities(JPMCC), believed that we must pay attention to event risks. Bluford Putnam, Managing Director & Chief Economist of CME group, argues that many existing risk models do not pay enough attention to the event risks.“When there are two scenarios, the market prices the probability-weighted outcome. So, when the outcome becomes known, there may occur dramatic price movements and market volatility,” he explained. He stated that financial markets have been more impacted by polarized elections, but commodity markets have been more impacted by trade wars and weather changes, he said. Weather shifts, such as the El Nino that is forming now suggest a more severe drought for Australia and Europe (wheat), less drought for Argentina (soybeans), he added. Prof.… continue reading

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Source: CTRM Center

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