mahtab mehrasa; Teymour Mohamadi
Abstract
Regarding the role of the energy market, especially oil, on the economy of countries, it is important to identify the future evolution of the market. In this respect, predicting the changeable extreme evolution of the oil price is crucial for decision and policy makers. This study attempts to investigate ...
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Regarding the role of the energy market, especially oil, on the economy of countries, it is important to identify the future evolution of the market. In this respect, predicting the changeable extreme evolution of the oil price is crucial for decision and policy makers. This study attempts to investigate the maximum changes of OPEC’s oil price by employing the concept of Value at Risk. To this end, GARCH family models based on the normal and extreme distribution were used, and it is expected that the focus on the latter in forecasting Value at Risk, especially in the face of extreme events, may end up in more realistic results. The results of the backtesting of models show that the ARMA-GARCH-EVT model predicts better than the other ones.
Ahmadreza Jalali Naiini; Vahid Ghorbani Pashakolae; Mohamad Sayadi
Volume 3, Issue 9 , January 2014, , Pages 31-52
Abstract
Due to price volatility in the oil market, market players are exposed to large risks. Value at Risk (VaR) is one of the main methods to measure market risk in various asset markets including commodities.,. In this study, Upside and Downside Risks are estimated by using the GED-GARCH method that is appropriate ...
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Due to price volatility in the oil market, market players are exposed to large risks. Value at Risk (VaR) is one of the main methods to measure market risk in various asset markets including commodities.,. In this study, Upside and Downside Risks are estimated by using the GED-GARCH method that is appropriate for leptokurtic distributions with fat tail. The daily spot and Futures oil prices data from January 1986 to December 2010 data for "in sample" and from January 2011 to July 2012 for "out of sample" are our data sample. To test the reliability of estimated VaR, the Kupiec test is used. Also by using Granger Causality analysis, the spillover effect risk between spot and futures oil price returns are investigated. Results show that spot and futures returns have leptokurtic distribution with fat tails. There is also a significant upside spillover effect risk from futures to spot price returns at 99% confidence level as for oil price increases during 2000s.
