Quant Ideas: market-making, risk and information in commodities

High volatility and noisy data sets have profound implications on risk management in commodity markets

commodities-shutterstock-294534425

It is well-known that commodity assets and markets exhibit extreme volatilities. This is often dismissed as an interesting peculiarity that would mean we only need to put some bigger numbers into formulas we imported wholesale from the traditional financial markets.

This misguided confidence in the effectiveness of standard financial tools has led many a bank and trading operation into a whirlwind of sudden gains and equally unexpected massive losses. As the old adage in the business has it: it

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Register

Want to know what’s included in our free membership? Click here

This address will be used to create your account

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here