This paper investigates the problem of the risk management for an import firm by using crude oil options. We propose a new risk measure (thereafter called CVaRMD) that synthesizes the mean and median deviation of the hedged portfolio loss to trace the extreme risk. The classical volatility models (GARCH-n, GARCH-t, GJR-n and GJR-t) are commonly-used in finance literature to depict the marginal distributions of the oil price and the exchange rate. Different from the time-consuming method of simulation, we employ Copula functions to deduce the cu...
