Abstract
This paper develops a generic adjustment framework to improve in the market risk forecasts of diverse risk forecasting models, which indicates the degree to which risk is under- and overestimated. In the context of the energy commodity market, a market in which tail risk management is of crucial importance, the empirical analysis shows that after this adjustment framework is applied, the forecasting performance of various risk models generally improves, as verified by a battery of backtesting methods. Additionally, our method also lessens the risk model disagreement among post-adjusted risk forecasts.
| Original language | English |
|---|---|
| Pages (from-to) | 1332-1372 |
| Number of pages | 41 |
| Journal | Journal of Futures Markets |
| Volume | 43 |
| Issue number | 10 |
| Early online date | 5 Apr 2023 |
| DOIs | |
| Publication status | Published - 1 Oct 2023 |
Bibliographical note
Funding Information:The authors would like to thank Andrew Patton (discussant) as well as participants at 11th International Conference on Futures and Other Derivatives and 2022 Australasian Finance and Banking Conference for helpful comments and suggestions. Any errors are our own. Yujing Gong gratefully acknowledges the support of the Economic and Social Research Council (ESRC) in funding the Systemic Risk Centre (grant numbers ES/K002309/1 and ES/R009724/1).
Publisher Copyright:
© 2023 The Authors. The Journal of Futures Markets published by Wiley Periodicals LLC.
Keywords
- energy futures
- expected shortfall
- finance
- model disagreement
- value at risk
ASJC Scopus subject areas
- Economics and Econometrics
- Accounting
- General Business,Management and Accounting
- Finance