Fat Tails Value at Risk and the Palladium Returns

Jianhua Ding

Authors

Jianhua Ding

Keywords:

skewed t distribution; goodness of fit; riskmanagement

Abstract

The past decade has witnessed the rapid growing of the world palladium market. Thus, it is even more important to develop effective quantitative tools for risk management of palladium assets at this moment. In this paper, we investigate five different types of widely-used statistical distributions and employ the industry standard risk measurement, Value at Risk, for risk management of daily palladium spot returns. We first apply four different criteria to compare the goodness of fit of the five distributions, and then calculate the VaRs based on the parameters estimated from the first step. Our results indicate the Skewed t distribution has the best insample fitting and generate VaR values closest to the nonparametric historical VaR values.

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How to Cite

Fat Tails Value at Risk and the Palladium Returns. (2018). Global Journal of Management and Business Research, 18(B3), 11-16. https://journalofbusiness.org/index.php/GJMBR/article/view/2490

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