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Yes Strategic Asset Allocation: Determining the Optimal Portfolio with Ten Asset Classes Strategic Asset Allocation and Commodities The Case for Commodities An Asset Class for All Seasons: The Benefits of a Strategic Allocation to Commodities No Should Investors Include Commodities in Their Portfolios After All? New Evidence My Take Although there ...


5

That's a complicated subject. Unless you're on the trading desk of a power/chemical/refinery company, you probably won't find much information. In addition, if your company doesn't have the "marginal" (best) equipment, such that you compete on efficiency/price, you'll only watch from the sidelines. Here's a previous discussion: ...


4

The common approach to temperature derivatives in their first run of popularity (in the late 1990's) was to use an Ornstein-Uhlenbeck process to describe deviations of temperature from a seasonal average. So far as I know, no major innovations have arisen since then. Calibrating such a model is very simple, and so is valuing certain quantities such as ...


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My answer is to go with option 2, but go long the long-dated contracts. Looking at the forward curve for WTI crude, one can buy crude, say, for 5 years out at $83 per barrel. Not only you can avoid the monthly rolls, you can take advantage of the current medium-term/long-term backwardation in crude.


3

Very informative and balanced is: The Strategic and Tactical Value of Commodity Futures by Claude B. Erb, CFA, and Campbell R. Harvey One well-known scientifically based passive investment fund in Germany (ARERO) draws a ratio of 15% for commodities (60% world stocks and 25% bonds, rebalanced on a yearly basis) as a conclusion out of this - see the live ...


3

If I may share some wisdom that was passed to me and that I insisted I test empirically and through painful lessons learned to take seriously and trust in: There is nothing that is guaranteed in life (aside us all having to die). You already sound like you made up your mind on the long side of the oil trade. Have you considered that not the demand for oil ...


2

What about a total return swap on the price of oil? In general, search for things with a high correlation or cointegrated with oil and check what risks you would take on compared to physically holding oil and see how you can minimize them. For instance, in the oil stocks case, you could short equity futures to only take energy stock risk instead of general ...


1

I am a professor too and I did work with Siemens Corporate Technology which provides the quantitative technology for their copper and electricity trading (Siemens being one of the biggest players in this area in Europe). They are mainly using sophisticated neural networks. We also published a paper together, see my answer here: What types of neural networks ...


1

I wouldn't say that there is a single industry standard. Also, I'm not sure you should try expressing all risks in a single number, or at least be aware of it's deficiencies. If you're interested in VaR, you could consider doing historical VaR for example (be sure to correct for seasonality effects and the curve rolling down with the passage of time). One ...


1

The daily mark-to-market reduces the counterparty risk by making sure every day that the counterparties can pay for their losses. For a forward contract, on the other hand, there is no daily mark-to-market and one simply have to trust that the counterparty can pay up (or deliver/take delivery of goods) at settlement. Lets consider the Farmer. Yes, his price ...


1

Keyword SPAN and the summarized answer is that it sets margin requirements as a function of risk/volatility. CME and other exchanges also function as clearers and thus they have an interest that market participants who clear with CME remain solvent. The exchange runs stress tests and determines a reasonable amount of performance bond that has to be deposited ...


1

The controversy surrounding commodity futures flows from Gorton and Rouwenthorst (2004). The authors show an equal-weight portfolio of long positions in commodity futures provides a Sharpe ratio greater than the one earned by holding a cap-weighted portfolio of U.S. stocks (beginning in the 1950's through 2004 or so). In essence, why should holding a ...


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In the formulation of your hypotheses you had to assume that this is relevant news to the market with an imidiate effect on prices and volatilities, in other words that a rating action leads to a structural break, not the other way round (that a structural break leads to rating action). The problem in testing will probably be a too small sample within this ...


1

Hedging is hedging, it's more related to the market you're trading on than to what your goals are or whether you are a bank or an industrial corporation. Granted, some institutions may be able to trade things others cannot, but in principle the same models will aply if your position in the market is the same (i.e. most financial models used for hedging ...



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