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Jorion, P. (2000). Value at Risk: The New Benchmark for Managing Financial Market Risk. McGraw-Hill Trade, N.Y.

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Article

Review on Wavelet Denoised Value at Risk and Application on Crude Oil Market

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


International Journal of Global Energy Markets and Finance. 2018, Vol. 1 No. 1, 4-10
DOI: 10.12691/ijgefm-1-1-2
Copyright © 2018 Science and Education Publishing

Cite this paper:
Samia Mederessi, 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.

Correspondence to: Samia  Mederessi, Higher Institute of Management of Tunis, University of Tunis, Tunisia. Email: mederessisamia@yahoo.fr

Abstract

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.

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