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Non-Classical Measures of Investment Risk on the Market of Precious Non-Ferrous Metals Using the Methodology of Stable Distributions

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  • Dominik Krezolek

    (University of Economics in Katowice)

Abstract

The aim of this article is to present some non-classical risk measures which are commonly used in financial investments, including investments in assets from the market of precious non-ferrous metals. The time series of log-returns of gold, silver, platinum and palladium prices are considered. To properly asses the investment risk the measures based on Value-at-Risk methodology have been used (the VaR estimation approach based on values from the tail of the distribution). Additionally, the measure comparing expected profits to expected losses from the opposite tails distribution has been shown – the Rachev ratio. It was assumed that the log-returns of presented assets belong to the family of stable distributions. The results confirm the validity of the use of stable distributions to asses the risk on the precious non-ferrous metals market.

Suggested Citation

  • Dominik Krezolek, 2012. "Non-Classical Measures of Investment Risk on the Market of Precious Non-Ferrous Metals Using the Methodology of Stable Distributions," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 12, pages 89-104.
    • Handle: RePEc:cpn:umkdem:v:12:y:2012:p:89-104
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    1. repec:hum:wpaper:sfb649dp2005-008 is not listed on IDEAS
    2. Szymon Borak & Wolfgang Härdle & Rafał Weron, 2005. "Stable Distributions," Springer Books, in: Statistical Tools for Finance and Insurance, chapter 1, pages 21-44, Springer.
    3. Hammoudeh, Shawkat & Malik, Farooq & McAleer, Michael, 2011. "Risk management of precious metals," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(4), pages 435-441.
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