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Empirical Evidence Linking Futures Price Movements of Biofuel Crops and Conventional Energy Fuel

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Book cover Econometrics of Risk

Part of the book series: Studies in Computational Intelligence ((SCI,volume 583))

Abstract

This study proposes a dynamic vine copula based ARMAX-GARCH model to explore the dependence structures between energy futures and agricultural futures, and between corn future and soybean future conditional on energy futures etc. The more important thing is that we employ the empirical results of dynamic vine copulas to forecast the expected shortfall (ES) and the optimal portfolio weights (OPW) based on minimum ES and Monte Carlo simulation method results showed that the appropriate margins were skewed student t distribution for soybean future return, and student t distribution for crude oil, palm oil and corn future returns, and the time-varying copulas T copula, R-BB8(180\(^\circ \)), R-BB8(180\(^\circ \)), Gaussian copula, R-Joe(180\(^\circ \)) and T copula can preferably capture the dependences compared with static copulas in C-vine copula structure. Moreover, we found that the values of ES will converge to \(-0.0121, -0.0145\) and \(-0.0164\) at period t\(+\)1 under 5, 2 and 1 % level, respectively. Meanwhile, As long as we invest in strict accordance with the optimal portfolio weights, the ES will reduce 56, 54 and 53 % at 5, 2 and 1 % level, respectively.

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Author information

Authors and Affiliations

  1. Faculty of Economics, Chiang Mai University, Chiang Mai, 50200, Thailand

    Jianxu Liu & Songsak Sriboonchitta

  2. Department of Agricultural and Resource Economics, University of California at Berkeley, 207 Giannini Hall, Berkeley, CA, 94720-3310, USA

    Roland-Holst David & Zilberman David

  3. Faculty of Agriculture, Department of Agricultural Economics and Agricultural Extension, Chiang Mai University, Chiang Mai, 50200, Thailand

    Aree Wiboonpongse

  4. Faculty of Economics, Prince of Songkla University, Songkla, Thailand

    Aree Wiboonpongse

Authors
  1. Jianxu Liu
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  2. Songsak Sriboonchitta
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  3. Roland-Holst David
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  4. Zilberman David
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  5. Aree Wiboonpongse
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Corresponding author

Correspondence to Songsak Sriboonchitta .

Editor information

Editors and Affiliations

  1. Japan Advanced Institute of Science and Technology, Nomi, Japan

    Van-Nam Huynh

  2. Department of Computer Science, University of Texas at El Paso, El Paso, Texas, USA

    Vladik Kreinovich

  3. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Songsak Sriboonchitta

  4. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Komsan Suriya

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Liu, J., Sriboonchitta, S., David, RH., David, Z., Wiboonpongse, A. (2015). Empirical Evidence Linking Futures Price Movements of Biofuel Crops and Conventional Energy Fuel. In: Huynh, VN., Kreinovich, V., Sriboonchitta, S., Suriya, K. (eds) Econometrics of Risk. Studies in Computational Intelligence, vol 583. Springer, Cham. https://doi.org/10.1007/978-3-319-13449-9_20

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  • DOI: https://doi.org/10.1007/978-3-319-13449-9_20

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-13448-2

  • Online ISBN: 978-3-319-13449-9

  • eBook Packages: EngineeringEngineering (R0)

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