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Title: WTI crude oil option-implied VaR and CVaR Authors:  Giovanni Barone-Adesi - University of Lugano (Switzerland)
Carlo Sala - ESADE (Spain)
Chiara Legnazzi - USI and Swiss Finance Institute, Lugano (Switzerland)
Marinela Finta - SMU (Singapore)
Giovanni Barone Adesi - Lugano University (Switzerland) [presenting]
Abstract: Using option market data, the aim is to derive naturally forward-looking, non-parametric and model-free risk estimates, three desired characteristics hardly obtainable using historical returns. The option-implied measures are only based on the first derivative of the option price with respect to the strike price, bypassing the difficult task of estimating the tail of the return distribution. We estimate and backtest the 1\%, 2.5\% and 5\% WTI crude oil futures option-implied VaR and CVaR for the years 2011-2016 and for both tails of the distribution. Compared with risk estimations based on the Filtered Historical Simulation (FHS) methodology, our results show that the option-implied risk metrics are valid alternatives to the statistically-based historical models.