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VaR and CVaR estimates in BRIC’s Oil Sector: A Normal Inverse Gaussian Distribution Approach

Author

Listed:
  • Eduardo Sánchez Ruenes

    (Tecnológico de Monterrey, México.)

  • José Antonio Núñez Mora

    (Tecnológico de Monterrey, México.)

  • Martha Beatriz Mota Aragón

    (Universidad Autónoma Metropolitana, Mexico.)

Abstract

The Value at Risk (VaR) and the Conditional Value at Risk (CVaR) as measures that estimate risk, have been used in oil sector to measure extreme and unexpected scenarios of oil prices. Additionally, the Normal Inverse Gaussian (NIG) distribution, a special case of the Generalized Hyperbolic (GH) family, has been demonstrated to provide a better fit than Normal distribution to financial data. In this paper, we used NIG distribution to model a distribution of equity price returns in oil companies in Brazil, Russia, India and China (BRIC) economies in periods of unstable oil prices from 2004 to 2017, with the objective of demonstrating an underestimation of the risk measures when a Normal distribution is assumed and a more conservative estimate of those measures when considering a NIG distribution.

Suggested Citation

  • Eduardo Sánchez Ruenes & José Antonio Núñez Mora & Martha Beatriz Mota Aragón, 2020. "VaR and CVaR estimates in BRIC’s Oil Sector: A Normal Inverse Gaussian Distribution Approach," Economía: teoría y práctica, Universidad Autónoma Metropolitana, México, vol. 52(1), pages 207-236, Enero-Jun.
    • Handle: RePEc:ety:journl:v:52:y:2020:i:1:p:207-236
    DOI: 10.24275/etypuam/ne/522020/Sanchez
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    Cited by:

    1. José Antonio Núñez-Mora & Eduardo Sánchez-Ruenes, 2020. "Generalized Hyperbolic Distribution and Portfolio Efficiency in Energy and Stock Markets of BRIC Countries," IJFS, MDPI, vol. 8(4), pages 1-14, October.
    2. Xiao Jiang & Saralees Nadarajah & Thomas Hitchen, 2024. "A Review of Generalized Hyperbolic Distributions," Computational Economics, Springer;Society for Computational Economics, vol. 64(1), pages 595-624, July.

    More about this item

    Keywords

    Value at Risk (VaR); Conditional Value at Risk (CVaR); Normal Inverse Gaussian (NIG) distribution; oil equity returns; BRIC economies.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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