Risk management of precious metals
Source of Publication
Quarterly Review of Economics and Finance
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. © 2011 The Board of Trustees of the University of Illinois.
Hammoudeh, Shawkat; Malik, Farooq; and McAleer, Michael, "Risk management of precious metals" (2011). Scopus Indexed Articles. 2084.