BIROn - Birkbeck Institutional Research Online

    Time-consistency in managing a commodity portfolio: a dynamic risk measure approach

    Geman, Hélyette and Ohana, S. (2008) Time-consistency in managing a commodity portfolio: a dynamic risk measure approach. Journal of Banking & Finance 32 (10), pp. 1991-2005. ISSN 0378-4266.

    Full text not available from this repository.

    Abstract

    We address the problem of managing a storable commodity portfolio, that includes physical assets and positions in spot and forward markets. The vast amount of capital involved in the acquisition of a power plant or storage facility implies that the financing period stretches over a period of several quarters or years. Hence, an intertemporally consistent way of optimizing the portfolio over the planning horizon is required. We demonstrate the temporal inconsistency of static risk objectives based on final wealth and advocate the validity in our setting of a new class of recursive risk measures introduced by Epstein and Zin [Epstein, G., Zin, S., 1989. Substitution, risk aversion, and the temporal behavior of consumption and asset returns: A theoretical framework. Econometrica, 57 (4) 937–969] and Wang [Wang, T., 2000. A class of dynamic risk measures University of British Columbia]. These risk measures provide important insights on the trade-offs between date-specific risks (i.e., losses occurring at a point in time) and time-duration risks represented by the pair (return, risk) over a planning horizon; in a number of situations, they dramatically improve the efficiency of static risk objectives, as exhibited in numerical examples.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Commodity portfolio, dynamic risk measures, time-consistency, temporal elasticity of substitution
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Research Centres and Institutes: Commodities Finance Centre
    Depositing User: Administrator
    Date Deposited: 01 Feb 2011 09:44
    Last Modified: 02 Aug 2023 16:51
    URI: https://eprints.bbk.ac.uk/id/eprint/1948

    Statistics

    Activity Overview
    6 month trend
    0Downloads
    6 month trend
    333Hits

    Additional statistics are available via IRStats2.

    Archive Staff Only (login required)

    Edit/View Item Edit/View Item