AUTHOR=Li Ling , Hu Guopeng 

TITLE=Energy risk measurement and hedging analysis by nonparametric conditional value at risk model

JOURNAL=Frontiers in Energy Research

VOLUME=Volume 10 - 2022

YEAR=2022

URL=https://www.frontiersin.org/journals/energy-research/articles/10.3389/fenrg.2022.887946

DOI=10.3389/fenrg.2022.887946

ISSN=2296-598X

ABSTRACT=The accurate measurement and management of energy risk have become important issues of the economic development and energy security for all countries. The existing literatures generally adopt the Value at Risk (VaR) that doesn’t satisfy the subadditivity axiom to measure the energy risk, which makes the calculation defective. In this paper, we use the Conditional VaR (CVaR) with the characteristics of coherent and convex risk measurement to measure energy risk under nonparametric kernel (NPK) framework, on the basis of that, we consider how to use the energy derivatives to hedge the price risk of energy so that the result is more reasonable and effective. The empirical results show that the NPK method we proposed is more effective to measure the actual energy risk and carry out more effective risk hedging.