Risk Analysis and Value at Risk

Risk Analysis and Value at Risk

Given the Baltic Assessments for Average 4TCs for Capesize and Panamax 1 calendar ahead (Cal+1) FFAs in Excel file “Baltic Assessments 2013-14”,

a) Estimate the Rolling Volatility (annualised standard deviation) of the series over 2014 using a six-month (126 day) window.

b) Estimate the Exponentially Weighted Average Volatility (RiskMetrics approach) for the series over the same period as in part a), and plot the two (Rolling and EWAV) volatilities, assuming ?=0.94.

c) Estimate and plot the 1%-1day VaR for each of the FFA prices over 2014, using the Exponentially Weighted Average Volatility as well as the Rolling Volatility estimates.

d) Estimate and plot the 1%-1day VaR for a portfolio of long 1 Cape and short 2 Panamax contracts over the 2014, based on EWAV.

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