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Dependence and Extreme Dependence of Crude Oil and Natural Gas Prices with Applications to Risk Management
Company: Energy Economics
Company Url: Click here to open
Year Of Publication: 2013
Month Of Publication: December
Resource Link: Click here to open
Download Count: 0
View Count: 758
Comment Num: 0
Language: English
Source: article
Who Can Read: Free
Date: 12-29-2013
Publisher: Administrator
Summary
In this article, we show how the copula-GARCH approach can be appropriately used to investigate the conditional dependence structure between the crude oil and natural gas markets as well as to derive implications for portfolio risk management in extreme economic conditions. Using daily price data from January 1997 to October 2011, our in-sample results show evidence of asymmetric dependence between the two markets. The crude oil and gas markets tend to co-move closely together during bullish periods, but not at all during bearish periods. Moreover, taking the extreme comovement into account leads to an improvement in the accuracy of the out-of-sample Value-at-Risk forecasts.
Author(s)
ben Aissa, Mohamed Safouane Sign in to follow this author
Aloui, Riadh Sign in to follow this author
Hammoudeh, Shawkat Sign in to follow this author
Nguyen, Duc Khuong Sign in to follow this author
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