Extreme Value Analysis of Daily Canadian Crude Oil Prices

Feng Ren and David Giles
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Feng Ren: Department of Economics, University of Victoria, https://www.uvic.ca/socialsciences/economics/

No 708, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: Crude oil markets are highly volatile and risky. Extreme value theory (EVT), an approach to modelling and measuring risks under rare events, has seen a more prominent role in risk management in recent years. This paper presents an application of EVT to the daily returns of crude oil prices in the Canadian spot market between 1998 and 2006. We focus on the peak over threshold method by analyzing the generalized Pareto-distributed exceedances over some high threshold. This method provides an effective means for estimating tail risk measures such as Value-at-Risk and Expected Shortfall. The estimates of risk measures computed under different high quantile levels exhibit strong stability across a range of the selected thresholds. At the 99th quantile, the estimates of VaR are approximately 6.3% and 6.8% for daily positive and negative returns, respectively.

Keywords: Crude oil; daily returns; market volatility; extreme value analysis (search for similar items in EconPapers)
JEL-codes: C46 G32 Q40 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-10-09
New Economics Papers: this item is included in nep-ene and nep-rmg
Note: ISSN 1485-6441
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Extreme value analysis of daily Canadian crude oil prices (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:0708

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