1.

Record Nr.

UNINA9910973779303321

Autore

Roache Shaun

Titolo

Commodities and the Market Price of Risk / / Shaun Roache

Pubbl/distr/stampa

Washington, D.C. : , : International Monetary Fund, , 2008

ISBN

9786612841729

9781462367900

1462367909

9781451870794

1451870795

9781451988291

145198829X

9781282841727

1282841726

Edizione

[1st ed.]

Descrizione fisica

1 online resource (25 p.)

Collana

IMF Working Papers

IMF working paper ; ; WP/08/221

Disciplina

330.015195

Soggetti

Risk - Econometric models

Commodity futures - Econometric models

Capital assets pricing model

Banks and Banking

Capacity

Capital and Ownership Structure

Capital

Commercial products

Commodities

Commodity Markets

Derivative securities

Finance

Financial Instruments

Financial Risk and Risk Management

Financial risk management

Financial services law & regulation

Financing Policy

Futures

Goodwill

Institutional Investors

Intangible Capital

Interest rates



Interest Rates: Determination, Term Structure, and Effects

Investment & securities

Investment

Investments: Commodities

Investments: Futures

Investments: General

Macroeconomics

Market risk

Non-bank Financial Institutions

Pension Funds

Real interest rates

Return on investment

Saving and investment

Value of Firms

United States

Lingua di pubblicazione

Inglese

Formato

Materiale a stampa

Livello bibliografico

Monografia

Note generali

Description based upon print version of record.

Nota di bibliografia

Includes bibliographical references.

Nota di contenuto

Contents; I. Introduction; II. Merton's ICAPM Risk-pricing Model; A. Deriving the risk-pricing equation; B. Identifying state variables; III. Brief Review of the Literature; IV. Data; V. Estimating the Quantities and Prices of Risk; A. The macro risk exposure of commodities; B. Market prices for macro risk; VI. Results; A. Real interest rate risk is priced; B. The time-varying cost of interest rate insurance; C. Evidence for a commodity-specific risk premium; D. Model fit; VII. Conclusion; References; Appendix

Sommario/riassunto

Commodities are back following a stellar run of price performance, attracting financial investor attention. What are the fundamental reasons to hold commodities? One reason is the exposure offered to underlying risk factors. In this paper, I assess the macro risk exposure offered by commodity futures and test whether these risks are priced, using Merton's (1973) intertemporal capital asset pricing model for a sample of commodity prices covering the period January 1973 - February 2008. I find that commodity futures offer a hedge against lower interest rates and that investors are willing to accept lower expected returns for this position. Although some commodities are also a hedge against U.S. dollar depreciation, this risk is not priced.