Crude Oil Futures Hedging Strategies During COVID-19 Using VaR-Garch Models

DOI

10.2991/assehr.k.211209.178How to use a DOI?

Keywords

Crude Oil Futures; GARCH Model; VaR Model; Optimal Hedging Ratio

Abstract

In 2020, under the sweeping impact of the COVID-19 pandemic and a series of chain reactions that followed, the crude oil industry was hit hard. The most influential event was the price collapse of WTI futures and the unprecedented huge loss of some investors holding crude oil related products in their personal account in Bank of China. How to avoid the risk of fluctuations in prices for crude oil futures when encompassing extreme event? US WTI spot price and the futures price were analyzed to obtain the optimal hedging strategy for futures. First, crude oil futures and spot closing price were set as benchmarks, the following tests are carried out on their returns respectively: Auto-correlation test, Descriptive statistical test, Stability test, Co-integration test and Granger causality test; next, historical simulation and delta-normal method were applied to calculate the return rate of crude oil spot and hedged combination respectively, and it was proved that the hedging has a good effect.

Copyright

© 2021 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Qitong Wang
PY  - 2021
DA  - 2021/12/15
TI  - Crude Oil Futures Hedging Strategies During COVID-19 Using VaR-Garch Models
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 1095
EP  - 1102
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.178
DO  - 10.2991/assehr.k.211209.178
ID  - Wang2021
ER  -