engleski

Measuring oil price volatility as a means to managing commodity risk

In this paper the authors measure price volatility of crude oil prices and the associated level of risk from investing in oil, over a six-year period. With a parametric normal VaR model used in banking and finance for measuring equity and FX risk, authors measure the maximum expected loss from buying/selling oil over a specified holding period and the determined confidence level. It is established that a simple VaR model such as a normal parametric model gives satisfactory results in forecasting and measuring oil price volatility over the tested time period and confidence intervals. The applicability of Holt-Winter seasonal algorithm as a means of forecasting oil prices is also presented and analysed.

commodity risk ; oil price volatility ; VaR ; parametric approach

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