Market risk in commodity markets: a VaR approach

Pierre Giot and Sébastien Laurent

No 2003028, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We put forward Value-at-Risk models relevant for commodity traders who have long and short trading positions in commodity markets. In a five-year out-of-sample study on aluminium, copper, nickel, Brent crude oil and WTI crude oil daily cash prices and cocoa nearby futures contracts, we assess the performance of the RiskMetrics, skewed Student APARCH and skewed student ARCH models. While the skewed Student APARCH model performs best in all cases, the skewed Student ARCH model delivers good results and its estimation does not require non-linear optimization procedures. As such this new model could be relatively easily integrated in a spreadsheet-like environment and used by market practitioners.

Keywords: Value-at-Risk; skewed Student distribution; ARCH; APARCH; commodity markets (search for similar items in EconPapers)
JEL-codes: C52 C53 G15 (search for similar items in EconPapers)
Date: 2003-04
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Citations: View citations in EconPapers (144)

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Journal Article: Market risk in commodity markets: a VaR approach (2003)
Working Paper: Market risk in commodity markets: a VaR approach (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2003028

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