Market Risks in Spot Markets of Crude Oil and Products: A Long Memory Value- At-Risk Approach

C W Cheong

Studies in Economics and Econometrics, 2010, vol. 34, issue 2, 19-38

Abstract: This study evaluates the market risks for three spot markets for crude oil and products. The market risk analysis considers both the bull and bear markets with long and short financial trading positions. For more reliable value-at-risk evaluations, a heavy-tailed long memory time varying volatility model is used under the robust quasi maximum likelihood estimation approach. It is found that only at a very low confidence level (≤ 99,75%), the heavy-tailed value-at-risk model provides an advantage in overcoming the risk of underestimating under the normality assumption.

Date: 2010
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DOI: 10.1080/10800379.2010.12097201

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