Commodity Market Risk 1980 – 2012: An Extreme Value Theory Approach
Torun Fretheim – PhD Student at NBU School of Economics and Business , Norwegian University of Life Sciences

We focus on the very rare but extreme market moves, and employ the block maxima method to investigate annual distribution of extremes. To gauge the accuracy of our findings we use the bootstrapping methodology to assign confidence intervals. Looking at a spectrum of 10 agricultural commodities, we find no evidence of a systematic increase in tail related risk during the last decade, with a possible exception for corn and wheat.


Torun Fretheim

I am a PhD Student at the School of Economics and Business, Norwegian University of Life Sciences. My main research interests are commodity markets and risk management, and I am associated with the Norwegian Center for Commodity Market Analysis (here). I currently reside in Norway, after spending two semesters in the UK as a visiting student at Birkbeck University of London.

 

“Our study is a contribution to the debate on whether agricultural commodity prices have become more volatile during recent years, with emphasis on extreme events and tail risk. Most studies of commodity price volatility focus on traditional risk measures like standard deviations, we wish to add to this literature by studying the extreme market moves as well.”

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