Study On The Correlation Between Crude Oil Price And Renewable Energy Stock Prices Based On Garch-Copula

Renewable energy has been into people's vision with the depletion of fossil energy and the increasing requirements of air quality since 2000,and develops rapidly in the past ten years.According to the International Energy Agency's data,the global renewable energy investment amounted to $2700 billion in 2014.Renewable energy,which is the alternatives of traditional energy such as oil,coal,its development is more or less affected by international crude oil prices.Therefore,it is necessary to study the relationship between international crude oil price and renewable energy price to help investors make better investment decisions.In this paper,we use the Copula model to describe the correlation between international crude oil price and renewable energy indexs,and established the GARCH-Copula model.And we review the past research on the international crude oil prices,renewable energy and the correlation between the crude oil and renewable energy.We also introduces some shortcomings of the traditional correlation measurement method,and proposes to use the Copula function to measure the correlation between financial time series.We introduce a more detailed description of the Copula function definition,classification and methods to measure the correlation,we also introduce the method of using Copula in Monte Carlo simulation method to calculate the VaR of portfolio in the end.In this paper,we selected Brent crude oil price,Wind new energy index,the S&P global clean energy index and WilderHill clean energy index from December 31,2009 to December 31,2016,amounts 1648 sets of data as the research object for empirical research.We first establish t-GARCH(1,1)to model the distribution of four return series,then select the normal Copula function,Gumbel Copula function,Clayton Copula function and Frank Copula function to model the correlation structure between Brent crude oil and the other three renewable energy indexs.We finally ensure the optimal Copula function,calculate the coefficient of tail dependence and the VaR of portfolios according to optimal Copula function,and determine the optimal portfolio.