International Journal of Global Energy Markets and Finance
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International Journal of Global Energy Markets and Finance. 2018, 1(1), 4-10
DOI: 10.12691/ijgefm-1-1-2
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Review on Wavelet Denoised Value at Risk and Application on Crude Oil Market

Samia Mederessi1, and Slaheddine Hallara1

1Higher Institute of Management of Tunis, University of Tunis, Tunisia

Pub. Date: April 23, 2018

Cite this paper:
Samia Mederessi and Slaheddine Hallara. Review on Wavelet Denoised Value at Risk and Application on Crude Oil Market. International Journal of Global Energy Markets and Finance. 2018; 1(1):4-10. doi: 10.12691/ijgefm-1-1-2


Oil markets are more competitive and volatile than ever before. This places the accurate and reliable measurement of market risks in the crucial position for both investment decision and hedging strategy designs. This paper attempts to measure risks in the oil market using Value at Risk (VaR) theory. To estimate VaR at higher accuracy and reliability, this paper proposes Wavelet Denoised Value at Risk (WDNVaR) estimates and compared with classical ARMA-GARCH approach. Performances of both approaches have been tested and compared using Kupiec backtesting procedures. Empirical studies of the proposed Wavelet Denoised Value at Risk (WDNVaR) have been conducted on two major oil markets (I.e. WTI & Brent). Experiment results confirm that WDNVaR improves the accuracy and reliability of VaR estimates over traditional ARMA-GARCH approach significantly, which results from its capability to clean up the data and alleviate distortions introduced by outliers.

Value-at-Risk crude oil ARMA-GARCH Wavelet Wavelet Denoised VaR Kupiec Backtesting procedures

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