RT Journal Article
T1 Cross-commodity analysis and applications to risk management
A1 Börger, Reik
A1 Cartea, Álvaro
A1 Kiesel, Rüdiger
A1 Schindlmayr, Gero
AB The understanding of joint asset return distributions is an important ingredientfor managing risks of portfolios. Although this is a well-discussed issue in fixedincome and equity markets, it is a challenge for energy commodities. In this studywe are concerned with describing the joint return distribution of energy-relatedcommodities futures, namely power, oil, gas, coal, and carbon. The objective ofthe study is threefold. First, we conduct a careful analysis of empirical returnsand show how the class of multivariate generalized hyperbolic distributions performsin this context. Second, we present how risk measures can be computed forcommodity portfolios based on generalized hyperbolic assumptions. And finally,we discuss the implications of our findings for risk management analyzing theexposure of power plants, which represent typical energy portfolios. Our mainfindings are that risk estimates based on a normal distribution in the context ofenergy commodities can be statistically improved using generalized hyperbolicdistributions. Those distributions are flexible enough to incorporate many characteristicsof commodity returns and yield more accurate risk estimates. Ouranalysis of the market suggests that carbon allowances can be a helpful toolfor controlling the risk exposure of a typical energy portfolio representing a powerplant
PB Wiley-Blackwell
SN 0270-7314
YR 2009
FD 2009-03
LK https://hdl.handle.net/10016/12155
UL https://hdl.handle.net/10016/12155
LA eng
DS e-Archivo
RD 1 sept. 2024