Estimation of risk measures in energy portfolios using modern copula techniques
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Date
2012-10-15
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Abstract
The present paper analyses the dependence structure between WTI
and Brent crude oil spot log-returns using modern copula techniques.
In a first step we apply several single equation models to the marginals
to account for autocorrelation and volatility clustering. Second, to select
both copulas and tail copulas characterising the joint dynamics
between the time series we implement and evaluate newly introduced
bootstrap-based goodness-of-fit tests. Based on each approach, a comprehensive
backtesting is performed by simulating and comparing the
risk measures Value-at-Risk and Expected Shortfall with historical values.
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Keywords
backtesting, crude oil, goodness-of-fit tests, joint dynamics, risk measures, tail copulas