Publication Type
Journal Article
Version
submittedVersion
Publication Date
9-2019
Abstract
Using option market data we derive naturally forward-looking, non-parametric and model-free risk estimates, three desired characteristics hardly obtainable using historical returns. The option-implied measures are only based on the first derivative of the option price with respect to the strike price, bypassing the difficult task of estimating the tail of the return distribution. We estimate and backtest the 1%, 2.5%, and 5% WTI crude oil futures option-implied value at risk and conditional value at risk for the turbulent years 2011–2016 and for both tails of the distribution. Compared with risk estimations based on the filtered historical simulation methodology, our results show that the option-implied risk metrics are valid alternatives to the statistically based historical models.
Keywords
Backtest, Elicitability, Option prices, VaR and CVaR
Discipline
Agribusiness | Economics | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Forecasting
Volume
38
Issue
6
First Page
552
Last Page
563
ISSN
0277-6693
Identifier
10.1002/for.2580
Publisher
Wiley: 24 months
Embargo Period
3-27-2022
Citation
BARONE-ADESI, Giovanni; FINTA, Marinela Adriana; LEGNAZZI, Chiara; and SALA, Carlo.
WTI crude oil option implied VaR and CVaR: An empirical application. (2019). Journal of Forecasting. 38, (6), 552-563.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6976
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1002/for.2580