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Dynamic Econometric Models

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

Authors

  • Dominik Krężołek Department of Demography and Economic Statis-tics, University of Economics in Katowice

DOI:

https://doi.org/10.12775/DEM.2012.006

Keywords

stable distributions, Value-at-Risk, Expected Shortfall, Median Shortfall, Rachev ratio, precious metals

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.

References

Artzner, P., Delbaen, F., Eber, J. M., Heath, D. (1997), Thinking Coherently, Risk, 10, 68–71.

Biglova, A., Ortobelli, S., Rachev, S. T., Stoyanov, S. (2004), Different Approaches to Risk Estimation in Portfolio Theory, Journal of Portfolio Management, 31(1), 106.

Borak, Sz., Härdle, W., Weron, R. (2005), Stable Distributions, Springer, Berlin.

Hammoudeh, S., Malik, F., McAleer, M. (2011), Risk Management of Precious Metals, Quarterly Review of Economics and Finance, 51, 435–441.

Krężołek, D. (2010), Kwantylowe oraz koherentne miary ryzyka – analiza empiryczna na rynku metali nieżelaznych z wykorzystaniem rodziny statystycznych rozkładów stabilnych (Quantiles and Coherent Risk Measures – An Empirical Analysis on the Non-ferrous Met-als’ Market Based on the Family of Stable Distributions), Finanse, Rynki Finansowe i Ubezpieczenia. Skuteczne Inwestowanie (Finance, Financial Markets and Insurance. Ef-fective Investment), 29, 433–444.

Rachev, S., Mittnik, S. (2000), Stable Paretian Models in Finance, Series in Financial Economics and Quantitative Analysis, John Wiley & Sons Ltd., England.

Samorodnitsky, G., Taqqu, M. S. (1994), Stable Non-gaussian Random Processes. Stochastic Models with Infinite Variance, Chapman & Hall, New York, 1994.

Trzpiot, G. (2010), Wielowymiarowe metody statystyczne w analizie ryzyka inwestycyjnego (Mul-tivariate Statistical Methods in Investment Risk Analysis), Wydawnictwo PWE, Warszawa.

Trzpiot, G., Krężołek, D. (2009), Quantiles Ratio Risk Measures for Stable Distributions Models in Finance (Kwantylowe miary ryzyka z wykorzystaniem rozkładów stabilnych w finansach), Studia Ekonomiczne, 53 (Economic Studies, 53), Zeszyty Naukowe Akademii Ekonomicznej w Katowicach, 109–120.

Dynamic Econometric Models

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Published

2012-12-09

How to Cite

1.
KRĘŻOŁEK, Dominik. Non-Classical Measures of Investment Risk on the Market of Precious Non-Ferrous Metals Using the Methodology of Stable Distributions. Dynamic Econometric Models. Online. 9 December 2012. Vol. 12, pp. 89-103. [Accessed 1 July 2025]. DOI 10.12775/DEM.2012.006.
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Vol. 12 (2012)

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Articles

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The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).

To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.

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