Portfolio Stress Testing Applied to Commodity Futures

November 14, 2019

The increased amount of investments in commodity futures over the past decade have prompted calls for more thorough, forward-looking stress tests of portfolios. Florentina Paraschiv, Stine Marie Reese and Margrethe Skjelstad highlight the importance of using hybrid and hypothetical scenarios, and explain why special attention should be given to the tail risk in both the individual commodity returns and the tail correlations.

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