Price risk in crude oil markets: A VaR approach of EVT

This paper introduces the extreme value theory (EVT) of VaR into the research on the price risk of international crude oil spot markets. To get the empirical results, the POT (peaks over threshold) model of EVT is used to study the spot price data of WIT and Brent. As some improvement, this paper introduces partial regression coefficient, clustering and runs test into the POT model. Based on the empirical results, the difference between two spot markets is discussed. Furthermore, the difference between downside risk and upside risk in each spot market is also discussed.