### Abstract

Value-at-Risk, known as VaR, gives a prediction with a certain level of confidence of potential portfolio losses that may be encountered over a specified time period due to adverse price movements in the portfolio’s assets. For example, a VaR of 1 million dollars at the 95% level of confidence implies that overall portfolio losses should not exceed 1 million dollars more than 5% of the time over a given holding period. This research examines the effectiveness of VaR measures, developed using alternative estimation techniques, in predicting large losses in the cattle-feeding margin. Results show that several estimation techniques, both parametric and nonparametric, provide well-calibrated estimates of VaR such that violations (losses exceeding the VaR estimate) are commensurate with the desired level of confidence. In particular, estimates developed using the RiskMetrics™ method appear robust for instruments that have linear payoff structures such as cash commodity prices.

Original language | English (US) |
---|---|

Pages (from-to) | 333-353 |

Number of pages | 21 |

Journal | Agribusiness |

Volume | 17 |

Issue number | 3 |

DOIs | |

State | Published - Jan 1 2001 |

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### ASJC Scopus subject areas

- Food Science
- Geography, Planning and Development
- Animal Science and Zoology
- Agronomy and Crop Science
- Economics and Econometrics

### Cite this

*Agribusiness*,

*17*(3), 333-353. https://doi.org/10.1002/agr.1020

**Market risk and the cattle feeding margin : An application of Value-at-Risk.** / Manfredo, Mark; Leuthold, Raymond M.

Research output: Contribution to journal › Article

*Agribusiness*, vol. 17, no. 3, pp. 333-353. https://doi.org/10.1002/agr.1020

}

TY - JOUR

T1 - Market risk and the cattle feeding margin

T2 - An application of Value-at-Risk

AU - Manfredo, Mark

AU - Leuthold, Raymond M.

PY - 2001/1/1

Y1 - 2001/1/1

N2 - Value-at-Risk, known as VaR, gives a prediction with a certain level of confidence of potential portfolio losses that may be encountered over a specified time period due to adverse price movements in the portfolio’s assets. For example, a VaR of 1 million dollars at the 95% level of confidence implies that overall portfolio losses should not exceed 1 million dollars more than 5% of the time over a given holding period. This research examines the effectiveness of VaR measures, developed using alternative estimation techniques, in predicting large losses in the cattle-feeding margin. Results show that several estimation techniques, both parametric and nonparametric, provide well-calibrated estimates of VaR such that violations (losses exceeding the VaR estimate) are commensurate with the desired level of confidence. In particular, estimates developed using the RiskMetrics™ method appear robust for instruments that have linear payoff structures such as cash commodity prices.

AB - Value-at-Risk, known as VaR, gives a prediction with a certain level of confidence of potential portfolio losses that may be encountered over a specified time period due to adverse price movements in the portfolio’s assets. For example, a VaR of 1 million dollars at the 95% level of confidence implies that overall portfolio losses should not exceed 1 million dollars more than 5% of the time over a given holding period. This research examines the effectiveness of VaR measures, developed using alternative estimation techniques, in predicting large losses in the cattle-feeding margin. Results show that several estimation techniques, both parametric and nonparametric, provide well-calibrated estimates of VaR such that violations (losses exceeding the VaR estimate) are commensurate with the desired level of confidence. In particular, estimates developed using the RiskMetrics™ method appear robust for instruments that have linear payoff structures such as cash commodity prices.

UR - http://www.scopus.com/inward/record.url?scp=25144441290&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=25144441290&partnerID=8YFLogxK

U2 - 10.1002/agr.1020

DO - 10.1002/agr.1020

M3 - Article

AN - SCOPUS:25144441290

VL - 17

SP - 333

EP - 353

JO - Agribusiness

JF - Agribusiness

SN - 0742-4477

IS - 3

ER -