Measuring Market Risk Of The Cattle Feeding Margin: An Application Of Value-At-Risk Analysis
VaR gives a prediction of potential portfolio losses, with a certain level of confidence, that may be encountered over a specified time period due to adverse price movements in the portfolio's assets. For example, a VaR of 1 million dollars at the 95% level of confidence implies that overall portfolio losses should not exceed 1 million dollars more than 5% of the time over a given holding period. This research examines the effectiveness of VaR measures, developed using alternative estimation techniques, in predicting large losses in the cattle feeding margin. Results show that several estimation techniques, both parametric and non-parametric, provide well calibrated VaR estimates such that violations (losses exceed the VaR estimate) are commensurate with the desired level of confidence. In particular, estimates developed using JP Morgan's Risk Metrics methodology seem promising.
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- Ted C. Schroeder & Marvin L. Hayenga, 1988.
"Comparison of selective hedging and options strategies in cattle feedlot risk management,"
Journal of Futures Markets,
John Wiley & Sons, Ltd., vol. 8(2), pages 141-156, 04.
- Hayenga, Marvin L. & Schroeder, Ted C., 1988. "Comparison of Selective Hedging and Option Strategies in Cattle Feed Lot Risk Management," Staff General Research Papers Archive 11313, Iowa State University, Department of Economics.
- Jose A. Lopez, 1996. "Regulatory Evaluation of Value-at-Risk Models," Center for Financial Institutions Working Papers 96-51, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Jose A. Lopez, 1997. "Regulatory evaluation of value-at-risk models," Research Paper 9710, Federal Reserve Bank of New York.
- Jose A. Lopez, 1997. "Regulatory evaluation of value-at-risk models," Staff Reports 33, Federal Reserve Bank of New York.
- Darryll Hendricks, 1996. "Evaluation of value-at-risk models using historical data," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 39-69.
- Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583. Full references (including those not matched with items on IDEAS)
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