Measuring the price risk of energy portfolio with Copula-VaR model

With a number of international cash flows and venture capital pouring into energy markets, the energy price goes up and down sharply. To rise up to the challenge, we must estimate the risk deriving from price volatility accurately. In this paper, we first introduce the energy price risk level index (VaR_EP), and then set up the energy price risk measurement model based on Copula-VaR. At last we make an empirical analysis about the risk of energy investment portfolios. The result shows that energy price risk measurement model based on Copula-VaR has an advantage over the historical simulation method and weight-equal method because of considering relativity of price variables. When we used the model to analyze the risk of energy investment portfolios, we found that the risk of portfolio is lower than separate investments and the risk-avoiding performance of the optimal investment projects is better than the project of equal weight.