Extreme measures of agricultural financial risk

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Title: Extreme measures of agricultural financial risk
Authors: Cotter, John
Dowd, Kevin
Morgan, Wyn
Permanent link: http://hdl.handle.net/10197/1690
Date: 6-Oct-2008
Abstract: Risk is an inherent feature of agricultural production and marketing and accurate measurement of it helps inform more efficient use of resources. This paper examines three tail quantile-based risk measures applied to the estimation of extreme agricultural financial risk for corn and soybean production in the US: Value at Risk (VaR), Expected Shortfall (ES) and Spectral Risk Measures (SRMs). We use Extreme Value Theory (EVT) to model the tail returns and present results for these three different risk measures using agricultural futures market data. We compare the estimated risk measures in terms of their size and precision, and find that they are all considerably higher than normal estimates; they are also quite uncertain, and become more uncertain as the risks involved become more extreme.
Funding Details: University College Dublin. School of Business
Type of material: Working Paper
Publisher: University College Dublin. School of Business. Centre for Financial Markets
University College Dublin. School of Business
Series/Report no.: Centre for Financial Markets working paper series; WP-09-02; UCD Business Schools Working Paper Series; WP09/02
Keywords: Agricultural financial riskSpectral risk measuresExpected ShortfallValue at RiskExtreme Value Theory
Subject LCSH: Agriculture--Finance--United States
Risk--Econometric models
Extreme value theory
Other versions: http://www.ucd.ie/bankingfinance/docs/wp/WP-09-02.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Centre for Financial Markets Working Papers

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