Comparative research between VaR and ES on international nonferrous metals futures market

YANG Xian, LUFeng-bin, WANG Shou-yang

Systems Engineering - Theory & Practice ›› 2011, Vol. 31 ›› Issue (9) : 1645-1651.

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中国科学院数学与系统科学研究院期刊网
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Systems Engineering - Theory & Practice ›› 2011, Vol. 31 ›› Issue (9) : 1645-1651. DOI: 10.12011/1000-6788(2011)9-1645

Comparative research between VaR and ES on international nonferrous metals futures market

  • YANG Xian1, LUFeng-bin2, WANG Shou-yang2
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Abstract

In view that the volatility of International Nonferrous Metals Market has direct and profound impact on the cost of production and the development of economy in China, we estimated the VaR of the futures market using Historical Simulation (HS), Monte Carlo method (MC), Exponentially Weighted Moving Average approach (EWMA), Equally Weighted approach (EWA), GARCH and Extreme Value Theory (EVT) separately. Then, we estimated the ES of the futures market based on EVT. Finally, we adopted backtest to evaluate the power of each method. Our findings indicate that ES is better than VaR in evaluating market risks when there is a sharp fall or rise in commodity prices; GARCH and EWMA gain an advantage over the other four methods with a 95% level of confidence; EWMA, GARCH and HS gain an advantage over the other three methods with a 99% level of confidence.

Key words

VaR / ES / nonparametric method / parametric method / nonferrous metals / futures market

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YANG Xian, LUFeng-bin, WANG Shou-yang. Comparative research between VaR and ES on international nonferrous metals futures market. Systems Engineering - Theory & Practice, 2011, 31(9): 1645-1651 https://doi.org/10.12011/1000-6788(2011)9-1645

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