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Corporate Risk Management and the Role of Value-at-Risk

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  • Sanders, Dwight R.
  • Manfredo, Mark R.

Abstract

Value-at-Risk (VaR) estimates the downside risk of a portfolio of assets, usually derivatives, at a particular confidence level over a specified time horizon. VaR plays an important role in corporate risk management. This discussion piece highlights the role of VaR in the context of a corporate risk management system. The informational demands of such a system are presented in the context of a foodservice business that uses derivatives products to manage absolute price risk. Risks inherent in the use of derivatives products are also outlined. Through an examination of the informational demands of corporate risk managers, as well as the risks of derivative products, avenues for future research regarding the estimation of VaR measures are presented.

Suggested Citation

  • Sanders, Dwight R. & Manfredo, Mark R., 1999. "Corporate Risk Management and the Role of Value-at-Risk," 1981-1999 Conference Archive 285763, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nc8191:285763
    DOI: 10.22004/ag.econ.285763
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    References listed on IDEAS

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    1. James M. Mahoney, 1995. "Empirical-based versus model-based approaches to Value-at-Risk: an examination of foreign exchange and global equity portfolios," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 199-220.
    2. Mark R. Manfredo & Raymond M. Leuthold, 1999. "Value-at-Risk Analysis: A Review and the Potential for Agricultural Applications," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 21(1), pages 99-111.
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