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Risk Management of Precious Metals

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Hammoudeh, Shawkat and Malik, Farooq and McAleer, Michael (2011) Risk Management of Precious Metals. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 04, 2011, ] (Unpublished)

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Official URL: http://eprints.ucm.es/12448/


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Abstract

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.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Precious metals, Conditional volatility, Risk management, Value-at-risk.
Subjects:Social sciences > Economics > Finance
Social sciences > Economics > Econometrics
JEL:G1
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2011
Number:04
ID Code:12448
Deposited On:21 Mar 2011 12:18
Last Modified:15 Jun 2016 12:38

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