Naslov
Measuring risk of crude oil at extreme quantiles

Autori
Žiković, Saša

Izvornik
Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu (1331-8004) 29 (2011), 1; 9-31

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
WTI oil ; Value at Risk ; VaR ; extremes ; extreme value theory

Sažetak
The purpose of this paper is to investigate the performance of VaR models at measuring risk for WTI oil one-month futures returns. Risk models, ranging from industry standards such as RiskMetrics and historical simulation to conditional extreme value model, are used to calculate commodity market risk at extreme quantiles: 0.95, 0.99, 0.995 and 0.999 for both long and short trading positions. Our results show that out of the tested fat tailed distributions, generalised Pareto distribution provides the best fit to both tails of oil returns although tails differ significantly, with the right tail having a higher tail index, indicative of more extreme events. The main conclusion is that, in the analysed period, only extreme value theory based models provide a reasonable degree of safety while widespread VaR models do not provide adequate risk coverage and their performance is especially weak for short position in oil.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA