The Predictive Power of Value-at-Risk Models in Commodity Futures Markets

Journal of Asset Management, Vol. 11, No. 4, pp. 244 - 260, 2010

Posted: 20 Aug 2008 Last revised: 29 May 2013

See all articles by Roland Füss

Roland Füss

Swiss Finance Institute; University of St. Gallen - School of Finance

Zeno Adams

European Business School (EBS)

Dieter G. Kaiser

Robus Capital Management Limited; Frankfurt School of Finance & Management

Date Written: June 25, 2008

Abstract

This paper examines the in- and out-of-sample performance of various value-at-risk (VaR) approaches for commodity futures investments: conventional VaR, the Cornish-Fisher (CF) VaR, GARCH-type VaR models, and semi-parametric conditional autoregressive value-at-risk (CAViaR) models, which do not depend on the assumption of normally distributed i.i.d. error terms. A model comparison reveals that determining the best VaR model depends strongly on the underlying return series. Our results suggest that the CAViaR and GARCH-type models generally outperform the other VaRs. These models can incorporate time-varying volatility adequately and are sensitive to changes in the return-generating process. This has important implications for the risk management of portfolios involving passive long-only commodity futures positions with heavy-tailed data-generating processes.

Keywords: Commodities, risk management, value-at-risk (VaR), GARCH modelling, conditional autoregressive value-at-risk (CAViaR), quantile regression

JEL Classification: C14, C22, G11, G13

Suggested Citation

Füss, Roland and Adams, Zeno and Kaiser, Dieter G., The Predictive Power of Value-at-Risk Models in Commodity Futures Markets (June 25, 2008). Journal of Asset Management, Vol. 11, No. 4, pp. 244 - 260, 2010, Available at SSRN: https://ssrn.com/abstract=1233442

Roland Füss (Contact Author)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Zeno Adams

European Business School (EBS) ( email )

Rheingaustrasse 1
Oestrich-Winkel, Hessen 65375
Germany

Dieter G. Kaiser

Robus Capital Management Limited ( email )

25 Macklin Street
London, WC2B 5NN
United Kingdom
+496172-6816752 (Phone)

HOME PAGE: http://www.frankfurt-school.de/content/en/cpqf/team/Kaiser.html

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
2,200
PlumX Metrics