Evaluating the performance of VaR models in energy markets

In this paper we analyze the relative performance of 13 VaR models using daily returns of WTI, Brent, natural gas and heating oil one-month futures contracts. After obtaining VaR estimates we evaluate the statistical significance of the differences in performance of the analyzed VaR models. We employ the simulation-based methodology proposed by Zikovic and Filer (2013), which allows us to rank competing VaR models. Somewhat surprisingly, the obtained results indicate that for a large number of different VaR models there is no statistical difference in their performance, as measured by the Lopez size adjusted score. However, filtered historical simulation (FHS) and the semiparametric BRW model stand out as robust and consistent approaches that – in most cases – significantly outperform the remaining VaR models.