RISK MANAGEMENT

It Is Role Of Risk Management In Managing Price Volatility In The Global Oil And Gas Market

It Is Role Of Risk Management In Managing Price Volatility In The Global Oil And Gas Market

Introduction

In the volatile world energy markets, quantification and risk mitigation costs shows the number of trials due to time dependence of the instability, nonlinear dynamics and remains strong in the movement of oil yields. the instability of oil price has been customary in the center of the financial study agenda, not only for its result in the flow of money from oil-related companies (Fong and See, 2002: 71), but also because the meanings of powerful oil was certainly in macroeconomics and financial markets. It is not surprising therefore that in the energy economy literature is the large amount of empirical research analyzing the instability of the modeling and risk management.

Discussion

Traditionally, the family of autoregressive conditional heteroskedasticity (ARCH) is formed - presented has been widely used to count the instability of oil-dependent charges, due to its flexibility. However, the empirical study proposed that the occurrence of asymmetries, the fat is higher and time-dependent moments alignment, a general reference arc it is not proper and therefore, many additions have been developed in publications, either by presumption of distributions to the error structure complements or asymmetric periods, for example the impact of leverage in the process of variance (driesprong et al, 2008:. 307). For example, the domain contrast different forms forecasting GARCH in WTI, Brent and Dubai markets crude oil futures and find that fractionally integrated GARCH methods supply more unquestionable instability prospects, completing the persistence and memory of long are absolutely crucial components of the power market volatility (Costello et al, 2008:. 2154). Study investigates the instability of WTI futures market and finds that the additions of the asymmetric GARCH forms and error distributions consequences outperform the accuracy infer volatility models "predictive. Study shows that the assumption of normality leads to an underestimation of risk and the GARCH based on the generalized error distribution (GED) that looks more reliable in CCA GARCH models. In addition, research will focus importance of choosing the worthy movement in the GARCH context and find that crude oil and petroleum products "Value at Risk (VaR) is best stopped by fat distribution of the queue. In general, results of this study suggest that the hypothesis of fat following actions an important role in the VaR approaches, as necessary quantiles exactly balanced. Research on the other hand, employing the GARCH filter and chronic replication dependent (semi- Parametric GARCH) to VaR, while the prospects of the research provide an alternate work caviar (Conditonal autoregressive VaR) method based on regression quantiles. Other research control of different variant forms include GARCH (Chen and Chen, 2007: 390 .)

A major shortcoming is that GARCH forms induce high stage of persistent alarms, which incorrectly suggests high predictability, but in essence, reflects the regime moves or breaks in the process of functional ...