Risk Management of Precious Metals

Shawkat Hammoudeh, Farooq Malik () and Michael McAleer
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Farooq Malik: College of Business University of Southern Mississippi

No 2011-04, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

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.

Keywords: Precious metals; conditional volatility; risk management; value-at-risk. (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2011
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (3)

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https://eprints.ucm.es/id/eprint/12448/1/1104.pdf (application/pdf)

Related works:
Journal Article: Risk management of precious metals (2011)
Working Paper: Risk Management of Precious Metals (2011)
Working Paper: Risk Management of Precious Metals (2010)
Working Paper: Risk management of precious metals (2010)
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