Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula Model
This paper concentrates on estimating the risk of Title Transfer Facility (TTF) Hub natural gas portfolios by using the GARCH-EVT-copula model. We first use the univariate ARMA-GARCH model to model each natural gas return series. Second, the extreme value distribution (EVT) is fitted to the tails of...
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| Format: | Article |
| Language: | English |
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Wiley
2015-01-01
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| Series: | The Scientific World Journal |
| Online Access: | http://dx.doi.org/10.1155/2015/125958 |
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| author | Jiechen Tang Chao Zhou Xinyu Yuan Songsak Sriboonchitta |
| author_facet | Jiechen Tang Chao Zhou Xinyu Yuan Songsak Sriboonchitta |
| author_sort | Jiechen Tang |
| collection | DOAJ |
| description | This paper concentrates on estimating the risk of Title Transfer Facility (TTF) Hub natural gas portfolios by using the GARCH-EVT-copula model. We first use the univariate ARMA-GARCH model to model each natural gas return series. Second, the extreme value distribution (EVT) is fitted to the tails of the residuals to model marginal residual distributions. Third, multivariate Gaussian copula and Student t-copula are employed to describe the natural gas portfolio risk dependence structure. Finally, we simulate N portfolios and estimate value at risk (VaR) and conditional value at risk (CVaR). Our empirical results show that, for an equally weighted portfolio of five natural gases, the VaR and CVaR values obtained from the Student t-copula are larger than those obtained from the Gaussian copula. Moreover, when minimizing the portfolio risk, the optimal natural gas portfolio weights are found to be similar across the multivariate Gaussian copula and Student t-copula and different confidence levels. |
| format | Article |
| id | doaj-art-49d56bea7b974182b86943facadcceb5 |
| institution | Kabale University |
| issn | 2356-6140 1537-744X |
| language | English |
| publishDate | 2015-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | The Scientific World Journal |
| spelling | doaj-art-49d56bea7b974182b86943facadcceb52025-02-03T05:48:21ZengWileyThe Scientific World Journal2356-61401537-744X2015-01-01201510.1155/2015/125958125958Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula ModelJiechen Tang0Chao Zhou1Xinyu Yuan2Songsak Sriboonchitta3 Faculty of Economics, Chiang Mai University, 2397 Suthep, A. Mueang, Chiang Mai 200060, ThailandSchool of Economics, Northwest Normal University, Lanzhou, ChinaFaculty of Economics and Management, Yunnan Normal University, Yunnan, China Faculty of Economics, Chiang Mai University, 2397 Suthep, A. Mueang, Chiang Mai 200060, ThailandThis paper concentrates on estimating the risk of Title Transfer Facility (TTF) Hub natural gas portfolios by using the GARCH-EVT-copula model. We first use the univariate ARMA-GARCH model to model each natural gas return series. Second, the extreme value distribution (EVT) is fitted to the tails of the residuals to model marginal residual distributions. Third, multivariate Gaussian copula and Student t-copula are employed to describe the natural gas portfolio risk dependence structure. Finally, we simulate N portfolios and estimate value at risk (VaR) and conditional value at risk (CVaR). Our empirical results show that, for an equally weighted portfolio of five natural gases, the VaR and CVaR values obtained from the Student t-copula are larger than those obtained from the Gaussian copula. Moreover, when minimizing the portfolio risk, the optimal natural gas portfolio weights are found to be similar across the multivariate Gaussian copula and Student t-copula and different confidence levels.http://dx.doi.org/10.1155/2015/125958 |
| spellingShingle | Jiechen Tang Chao Zhou Xinyu Yuan Songsak Sriboonchitta Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula Model The Scientific World Journal |
| title | Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula Model |
| title_full | Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula Model |
| title_fullStr | Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula Model |
| title_full_unstemmed | Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula Model |
| title_short | Estimating Risk of Natural Gas Portfolios by Using GARCH-EVT-Copula Model |
| title_sort | estimating risk of natural gas portfolios by using garch evt copula model |
| url | http://dx.doi.org/10.1155/2015/125958 |
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