Browsing by Author "Kuzman, Boris"

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    How to hedge extreme risk of natural gas in multivariate semiparametric value-at-risk portfolio?
    (Technická Univerzita v Liberci, ) Živkov, Dejan; Kuzman, Boris; Subić, Jonel; Ekonomická fakulta
    The COVID-19 pandemic and the war in Ukraine have caused huge price changes in the natural gas market. This paper tries to minimise the extreme risk of natural gas, making two sixasset portfolios, where gas is combined with five developed and emerging European stock indices. We observe extreme risk from the aspect of classical parametric Value-at-Risk measure, but we also propose a new approach and optimise portfolios with semiparametric VaR as a target. Estimating the equicorrelation of the two portfolios, we determine that the emerging indices portfolio has a much lower level of integration, which is good for portfolio construction. Additionally, we divide the full sample into the pre-crisis and crisis periods to assess how portfolios look in the two intrinsically different subsamples. According to the results, both portfolios with the developed and emerging stock indices minimise extreme risk very well, but the latter portfolio is better. In the pre-crisis period, this advantage amounts to around 6% in the min-VaR portfolio and 3.5% in the min-mVaR portfolio. However, in the crisis period, the third and fourth moments come to the fore, meaning that hedging results increase significantly in favour of the emerging indices portfolios. In other words, the min-VaR and min-mVaR results of the emerging indices portfolio are better in amounts of more than 14% and 17%, respectively, vis-à-vis portfolios with the developed stock indices. We recommend using the semiparametric VaR metric because it is far more accurate and unbiased compared to the classical VaR since it considers all the key features of portfolio distribution.
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    Multiscale non-linear tale risk spillover effect from oil to stocks – The case of East European emerging markets
    (Technická Univerzita v Liberci, ) Zivkov, Dejan; Kuzman, Boris; Papic-Blagojevic, Natasa; Ekonomická fakulta
    This paper investigates the multiscale non-linear risk transmission effect from Brent oil to eleven European emerging stock markets. Dynamic extreme risk time series are created using the FIAPARCH-CVaR approach. The MODWT transformation is applied to make three wavelet details that represent different time horizons. In the final step, the MODWT time series are fitted into the Markov switching model to examine the spillover phenomenon. The results indicate that the Czech and Hungarian stock markets endure the spillover effect in crisis regime in the short term, probably because these markets are among the most efficient emerging European markets. On the other hand, a relatively high spillover effect is found in a peaceful rather than a crisis regime in the case of Poland. This is probably because the Polish index lists almost 300 stocks, which means that oil shocks disperse to a large number of different industry sectors. In small and less developed markets, such as Estonia, Slovenia, Bulgaria, and Croatia, a high spillover effect exists in a tranquil regime because these countries have high oil consumption per capita. Lithuania and Latvia do not report the spillover effect in the short run, while this is true for all time horizons in the case of Slovakia.