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Determining Conditional Value at Risk (CVaR) for Food Industry Companies’ Stocks Portfolios in the Tehran Stock Market

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Sustainable Agriculture and Agribusiness in Iran

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Abstract

The main objective of this study is determining the value at risk (VaR) and conditional value at risk (CVaR) of food industry companies’ stock portfolios on the Tehran stock market. The application of traditional tools in VaR and CVaR estimations is limited, especially when the returns show extreme and time-varying behavior. Therefore, we applied the DCC-GHARCH-EVT model to capture the tail distribution of portfolio risks and time-varying behavior. In addition, we used the Vine copula to describe the dependence structure between dairy and sugar portfolios’ returns. Based on the simulation method, we measured VaR and CVaR to determine the two portfolios’ risks. Our results show that the returns are dependent and that the two markets experienced extreme events. The sugar portfolio’s returns were more volatile, and extreme losses were more likely than extreme rewards in this portfolio. In addition, the VaR and CVaR results also indicate that the dairy portfolio is less risky as compared to the sugar portfolio.

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Notes

  1. 1.

    Tree is an acyclic connected graph with nodes and edges, and graph is a set of nodes N and a set of edges E which connect the nodes.

  2. 2.

    Canonical vine: C-Vine trees have a star structure.

  3. 3.

    Drawable vine: D-Vine trees have a path structure.

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Authors and Affiliations

  1. Department of Agricultural Economics, University of Tabriz, Tabriz, Iran

    Sahar Abedi & Esmaeil Pishbahar

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  1. Sahar Abedi
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  2. Esmaeil Pishbahar
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Correspondence to Esmaeil Pishbahar .

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Editors and Affiliations

  1. Department of Agricultural Economics, University of Tabriz, Tabriz, Iran

    Masoomeh Rashidghalam

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Abedi, S., Pishbahar, E. (2019). Determining Conditional Value at Risk (CVaR) for Food Industry Companies’ Stocks Portfolios in the Tehran Stock Market. In: Rashidghalam, M. (eds) Sustainable Agriculture and Agribusiness in Iran. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Singapore. https://doi.org/10.1007/978-981-13-6283-5_3

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