Dependence and risk management of portfolios of metals and agricultural commodity futures
BenSaïda, Ahmed Waqas, Hanif Mensi, Walid Vo, Xuan Vinh Hernandez, Jose Arreola Kang, Sang Hoon Ben
BenSaïda, Ahmed
Waqas, Hanif
Mensi, Walid
Vo, Xuan Vinh
Hernandez, Jose Arreola
Kang, Sang Hoon
Ben
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Supervisor
Date
2023-05
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Abstract
This paper examines the dependence structure and the portfolio allocation characteristics of a main industrial portfolio metals (gold, platinum, palladium, aluminum, silver, copper, zinc, lead, and nickel), and of an agricultural commodities portfolio (wheat, corn, soybeans, coffee, sugar cane, sugar beets, cocoa, cotton, and lumber). Our methodology is based on regular vine copulas and the conditional Value-at-Risk. The motivation to investigate the dependence structure and connectedness between agricultural, and metal commodities is to identify ways in which agricultural and metal commodities can hedge each other and to explore the possibilities of parallel investments. The results indicate that the dependence dynamics of the main metals portfolio are characterized by symmetric features. However, the dependence dynamics of the agricultural commodities portfolio are characterized by symmetric and asymmetric features; symmetric dynamics are predominant. Finally, the metal commodities portfolio is observed to be less risky for financial resource allocation during the global financial crisis.