Commodity Portfolio Management: Hedging Market Risk

The present HyperVolatility research expands the analytics entitled Commodity Portfolio Management: Structuring Considerations, which was previously published on the J.P. Morgan Global Commodities Applied Research Digest journal.

Structuring a portfolio is not particularly easy but when it comes to commodities, where the average volatility can be orders of magnitude higher than in equity markets, the task can become really difficult. In the first part of this quantitative research we found that commodity markets tend to be highly idiosyncratic in nature and consequently a “one size fits all” type of approach is suboptimal at best. In truth, the first research to point out the need for a tailored made approach to commodity investing was raised in another quantitative research entitled Commodity Portfolio Management.

The current HyperVolatility research will focus on extreme returns and how these impact commodity portfolios. Extreme returns have to be managed with extreme care because hedging them, as the analytics will show, makes all the difference between profit and loss.

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