TY - JOUR
T1 - Risk management of precious metals
AU - Hammoudeh, Shawkat
AU - Malik, Farooq
AU - McAleer, Michael
N1 - Funding Information:
The third author wishes to acknowledge the Australian Research Council, National Science Council, Taiwan, Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics, University of Tokyo, and a Visiting Erskine Fellowship, College of Business and Economics, University of Canterbury.
PY - 2011/11
Y1 - 2011/11
N2 - This paper examines volatility and correlation dynamics in price returns of gold, silver, platinum and palladium, and explores the corresponding risk management implications for market risk and hedging. Value-at-Risk (VaR) is used to analyze the downside market risk associated with investments in precious metals, and to design optimal risk management strategies. We compute the VaR for major precious metals using the calibrated RiskMetrics, different GARCH models, and the semi-parametric Filtered Historical Simulation approach. The best approach for estimating VaR based on conditional and unconditional statistical tests is documented. The economic importance of the results is highlighted by assessing the daily capital charges from the estimated VaRs.
AB - This paper examines volatility and correlation dynamics in price returns of gold, silver, platinum and palladium, and explores the corresponding risk management implications for market risk and hedging. Value-at-Risk (VaR) is used to analyze the downside market risk associated with investments in precious metals, and to design optimal risk management strategies. We compute the VaR for major precious metals using the calibrated RiskMetrics, different GARCH models, and the semi-parametric Filtered Historical Simulation approach. The best approach for estimating VaR based on conditional and unconditional statistical tests is documented. The economic importance of the results is highlighted by assessing the daily capital charges from the estimated VaRs.
KW - Conditional volatility
KW - G1
KW - Precious metals
KW - Risk management
KW - Value-at-risk
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U2 - 10.1016/j.qref.2011.07.002
DO - 10.1016/j.qref.2011.07.002
M3 - Article
AN - SCOPUS:80054776550
SN - 1062-9769
VL - 51
SP - 435
EP - 441
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
IS - 4
ER -