Agricultural Applications of Value-at-Risk Analysis: A Perspective
Mark Manfredo and
Raymond M. Leuthold
Finance from University Library of Munich, Germany
Abstract:
Value-at-Risk (VaR) determines the probability of a portfolio of assets losing a certain amount in a given time period due to adverse market conditions with a particular level of confidence. Value-at-Risk has received considerable attention from financial economists and financial practitioners for its use in risk reporting, in particular the risks of derivatives. This paper provides a "state-of-the-art" review of VaR estimation techniques and empirical findings found in the finance literature. The ability of VaR estimates to represent large losses associated with tail events varies among procedure, confidence level, and data used. To date, there is no consensus to the most appropriate estimation technique. Potential applications of Value-at-Risk are suggested in the context of agricultural risk management. In the wake of the Hedge-to-Arrive crisis, the lifting of agricultural trade options by the CFTC, and the decreased government participation, VaR seems to have a place in the agricultural risk manager's toolkit.
Keywords: Value-at-Risk; risk management; estimation procedures (search for similar items in EconPapers)
JEL-codes: Q Q13 Q14 (search for similar items in EconPapers)
Pages: 14 pages
Date: 1998-05-04
New Economics Papers: this item is included in nep-fmk
Note: Type of Document - pdf; prepared on pc; to print on HP Laserjet; pages: 14. Office for Futures and Options Research (OFOR) at the University of Illinois at Urbana-Champaign. Working Paper 98-04. For a complete list of OFOR working papers see
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:9805002
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