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Challenges in Commodities Risk Management

Authors :
Hilary Till

Principal, Premia Capital Management, LLC
Research Associate with the EDHEC Risk and Asset Management Research Centre

Joseph Eagleye
Co-founder of Premia Capital Management, LLC

The recent outperformance of commodities versus equities has caused a positive re-evaluation of commodities by both retail and institutional investors.

While the commodity markets provide a manager with ample opportunities for creating portfolios of diverse strategies, there are a number of challenges in doing so. In this article, the authors provide two examples of those challenges: (1) the correlations amongst commodities vary seasonally due to meaningful weather events, and (2) the emergence of China as a dominant force in the commodity markets has created new correlation footprints. The main implication of these observations is that risk management in the commodity markets is a very dynamic process.
Type :
Working Paper
Dates :
Created on December 5, 2005
Further information :
Pour plus d'informations, nous vous prions de vous adresser Joanne Finlay, Direction de la recherche de l'EDHEC [ joanne.finlay@edhec.edu]

Les opinions exprimes sont celles de l'auteur et n'engagent pas la responsabilit de l'EDHEC.

Finance


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