On the extreme dependence between agricultural tokens and agricultural commodities

Agricultural tokens represent a significant application of blockchain technology in the agricultural sector, enhancing market liquidity and efficiency. As blockchain assets, how to hedge the market risks associated with agricultural tokens is a concern for investors. This study employs the quantile coherency method and constructs investment portfolios to minimize Value-at-Risk (VaR) and Expected Shortfall (ES) to explore the extreme return interrelations between agricultural tokens and traditional agricultural commodities. It also analyses the performance of agricultural commodities in hedging extreme losses of agricultural tokens. The results indicate a weak linkage between the two markets, suggesting that agricultural commodities are ideal assets for mitigating the extreme risks of agricultural tokens. The long-term coherency between assets is more potent than in the short and medium terms, and the interrelationship is even stronger under extreme conditions. Grain commodities have better hedging potential against agricultural cryptocurrencies than other soft commodities. This paper holds potential reference value for academic research and practical market operations.