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Cash flow at risk: different estimation methods tested in the Brazilian steel industry

Author

Listed:
  • Fernanda Finotti Cordeiro Perobelli

    (FEA/UFJF)

  • Flávia Vital Januzzi
  • Leandro Josias Sathler Berbet
  • Danilo Soares de Medeiros

Abstract

Risk management is a subject that, crisis after crisis, assumes a relevant role in the environment of non-financial companies. Despite the growing importance of the subject, debate about the introduction of a model capable of evaluating the risks to which companies are exposed is still in its infancy. Considering this gap and the importance of the theme for companies, this study proposes constructing an empirical cash flow at risk model and applying it to companies in the steel sector in Brazil. We have analyzed two methods of risk factors identification: sector components and company-level components. After such identification, simulations of risk factors future behavior were made using either the historical distribution of each risk factors and residuals of each risk factor time-series model. In addition, a third (and naive) method was tested: bootstrap of each component of the cash flow.

Suggested Citation

  • Fernanda Finotti Cordeiro Perobelli & Flávia Vital Januzzi & Leandro Josias Sathler Berbet & Danilo Soares de Medeiros, 2007. "Cash flow at risk: different estimation methods tested in the Brazilian steel industry," Brazilian Review of Finance, Brazilian Society of Finance, vol. 5(2), pages 165-204.
    • Handle: RePEc:brf:journl:v:5:y:2007:i:2:p:165-204
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    More about this item

    Keywords

    market risks management; non-financial institutions; Brazilian steel sector;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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