Estimation of VaR with jump process: application in corn and soybean markets
Abstract
Value at Risk (VaR) is a quantitative measure used to evaluate the risk linked to the potential loss of investment or capital. Estimation of the VaR entails the quantification of prospective losses in a portfolio of investments, using a certain likelihood, under normal market conditions within a specific time period. The objective of this paper is to construct a model and estimate the VaR for a diversified portfolio consisting of multiple cash commodity positions driven by standard Brownian motions and jump processes. Subsequently, a thorough analytical estimation of the VaR is conducted for the proposed model. The results are then applied to two distinct commodities -- corn and soybean -- enabling a comprehensive comparison of the VaR values in the presence and absence of jumps.
Keywords
Cite
@article{arxiv.2311.00832,
title = {Estimation of VaR with jump process: application in corn and soybean markets},
author = {Minglian Lin and Indranil SenGupta and William Wilson},
journal= {arXiv preprint arXiv:2311.00832},
year = {2024}
}