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RIADH ALOUI, MOHAMED SAFOUANE BEN AISSA, DUC KHUONG NGUYEN, 2013. "A wavelet-based copula approach for modeling market risk
in agricultural commodity markets"
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| Abstract: |
| We consider the problem of accurate market risk modeling for agricultural
commodity products over heterogeneous investment horizons using copulas
and wavelet methods. Our results indicate that the degree and structure
of the dependence of daily commodity returns on the three market risk fac-
tors (federal funds rate, USD/Euro exchange rate, and world stock market
?uctuations) vary according to the time scale. Changes in the USD/EUR
exchange rate and the stock market index are the dominant risks for agri-
cultural commodity markets. Moreover, the tail dependence on the daily re-
turns of the three market risk factors is also scale-dependent, and frequently
asymmetric. Finally, there is evidence to suggest that the application of the
wavelet-copula model improves the accuracy of VaR estimates, compared to
traditional approaches. |
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