This research investigates the portfolio diversification benefits of commodities in the backdrop of uncertainty caused by the financial crisis, increased Financialization and speculation in commodity markets. Portfolios are formed out of varied asset classes comprise of equity, bond, infra structure, commodity spot & futures indices and sectoral indices such as agri, metals and energy sectors o...

We consider the dynamic risk management problem for a commodity processor in a multi-period setting. The firm procures an input commodity and processes it to produce an output commodity. The processed commodity is sold using forward contracts while the input itself can be traded at the end of the horizon. The firm can also trade financial derivative instruments to manage the commodity price ris...

First, we define a stochastic shortest path problem (SSP) on Borel space considering the distribution of total cost. Next, for this SSP, policy classes are set number steps to reach terminal state first time, and is designed each class. There no guarantee that probability large cost small with expected value (expected cost). The minimizes or Conditional Value at Risk (CVaR) may not state. propo...

The September 2008 collapse of Lehman Brothers was the 9/11 on Wall Street, and many articles had been written on the changes in the global risk landscape that followed. However, there is scarcity of rigorous studies using empirical data and advanced econometric methods to verify such a change and the nature of such a change. In this paper, we provide rigorous analyses of statistically signific...

Computing optimal stochastic portfolio execution strategies under an appropriate risk consideration presents many computational challenges. Using Monte Carlo simulations, we investigate an approach based on smoothing and parametric rules to minimize mean and Conditional Value-at-Risk (CVaR) of the execution cost. The proposed approach reduces computational complexity by smoothing the nondiffere...

This paper proposes several parametric models to compute the portfolio VaR and CVaR in a given temporal horizon and for a given level of confidence. Firstly, we describe extension of the EWMA RiskMetrics model considering conditional elliptically distributed returns. Secondly, we examine several new models based on different stable Paretian distributional hypotheses of return portfolios. Finall...

Over the past decade, financial companies have merged diverse areas including investment banking, insurance, retail banking, and trading operations. Despite this diversity, many global financial firms suffered severe losses during the recent recession. To reduce enterprise risks and increase profits, we apply a decentralized risk management strategy based on a stochastic optimization model. We ...

Value at risk (VaR) is an important and widely used measure of the extent to which a given portfolio is subject to risk present in nancial markets. Considerable amount of research was dedicated during recent years to development of acceptable methods for evaluation of this risk measure. In this paper, we present a method of calculating the portfolio which gives the optimal VaR among those, whic...

Independent risks are substitutes if the opportunity to invest in one risk cuts down the demand in the others. Intuition seems to sustain this idea, but if the problem is tackled in a normative framework, no consensus in the literature is found. In this paper we investigate what does happen if the decision rule is based on the Generalized Sharpe Ratio. The answer depends on the risk measure und...