TY  - JOUR
AU  - Zivkov, Dejan
AU  - Njegić, Jovan
AU  - Zakić, Vladimir
PY  - 2020
UR  - http://aspace.agrif.bg.ac.rs/handle/123456789/5334
AB  - This paper strives to analyze hedging strategies between Brent oil and six other heterogeneous assets - American ten-year bonds, US dollars, gold, natural gas futures, corn futures, and Europe, Australasia and Far East exchange-traded funds (EAFE-ETFs) - observing five wavelet time horizons and considering three different risk metrics: variance, value-at-risk (VaR) and conditional value-at-risk (CVaR). We construct two-asset portfolios, whereby conditional variances and covariances are obtained via a bivariate rolling dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity (DCC-GARCH) model. Results indicate that gold is the best combination with Brent for minimum-variance investors, while the Brent-natural gas pair produces the worst minimum-variance results due to the very high unconditional variance of gas. As for VaR and CVaR results, we find that Brent with gold gives relatively good outcomes, but the portfolio with gas heavily outperforms the portfolio with gold when one views longer time horizons. This happens because the Brent-gas portfolio has very low skewness and kurtosis on longer time horizons compared with the unhedged portfolio, and these characteristics favor good VaR and CVaR results. These findings could help global portfolio managers and investors who seek various ways to diversify their Brent oil investments, who act on different time horizons, and who target different risk-minimizing goals.
PB  - Incisive Media, London
T2  - Journal of Risk
T1  - Empirical analysis of oil risk-minimizing portfolios: the DCC-GARCH-MODWT approach
EP  - 91
IS  - 3
SP  - 65
VL  - 22
DO  - 10.21314/JOR.2020.425
ER  - 

@article{
author = "Zivkov, Dejan and Njegić, Jovan and Zakić, Vladimir",
year = "2020",
abstract = "This paper strives to analyze hedging strategies between Brent oil and six other heterogeneous assets - American ten-year bonds, US dollars, gold, natural gas futures, corn futures, and Europe, Australasia and Far East exchange-traded funds (EAFE-ETFs) - observing five wavelet time horizons and considering three different risk metrics: variance, value-at-risk (VaR) and conditional value-at-risk (CVaR). We construct two-asset portfolios, whereby conditional variances and covariances are obtained via a bivariate rolling dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity (DCC-GARCH) model. Results indicate that gold is the best combination with Brent for minimum-variance investors, while the Brent-natural gas pair produces the worst minimum-variance results due to the very high unconditional variance of gas. As for VaR and CVaR results, we find that Brent with gold gives relatively good outcomes, but the portfolio with gas heavily outperforms the portfolio with gold when one views longer time horizons. This happens because the Brent-gas portfolio has very low skewness and kurtosis on longer time horizons compared with the unhedged portfolio, and these characteristics favor good VaR and CVaR results. These findings could help global portfolio managers and investors who seek various ways to diversify their Brent oil investments, who act on different time horizons, and who target different risk-minimizing goals.",
publisher = "Incisive Media, London",
journal = "Journal of Risk",
title = "Empirical analysis of oil risk-minimizing portfolios: the DCC-GARCH-MODWT approach",
pages = "91-65",
number = "3",
volume = "22",
doi = "10.21314/JOR.2020.425"
}

Zivkov, D., Njegić, J.,& Zakić, V.. (2020). Empirical analysis of oil risk-minimizing portfolios: the DCC-GARCH-MODWT approach. in Journal of Risk
Incisive Media, London., 22(3), 65-91.
https://doi.org/10.21314/JOR.2020.425

Zivkov D, Njegić J, Zakić V. Empirical analysis of oil risk-minimizing portfolios: the DCC-GARCH-MODWT approach. in Journal of Risk. 2020;22(3):65-91.
doi:10.21314/JOR.2020.425 .

Zivkov, Dejan, Njegić, Jovan, Zakić, Vladimir, "Empirical analysis of oil risk-minimizing portfolios: the DCC-GARCH-MODWT approach" in Journal of Risk, 22, no. 3 (2020):65-91,
https://doi.org/10.21314/JOR.2020.425 . .