Our treatment of commodities is somewhat different from the standard RiskMetrics
approach, although it should generally give similar results. The reason for this is
that the standard RiskMetrics approach is essentially ‘dollar-centric’, the RiskMetrics
data sets give volatilities for forward commodities in forward dollars. The problem
with this is that it conflates the commodity term structure with the dollar term
structure. For example, to express the value of a forward copper position in JPY, we
convert price in forward dollars to a price in spot dollars, using the USD yield curve,
and then to JPY, based on the JPY/USD spot rate. As a result, a simple forward
position becomes enmeshed with USD interest rates without good reason.
To carry out our program of treating commodities in the same way as foreign
currencies, we need to convert the volatility and correlation data for commodities in
the RiskMetrics data sets so that they reflect future commodity prices expressed in
terms of spot commodity instead of future dollars. Fortunately, the volatilities and
correlations for the commodity discount factors can be derived from those provided
in the RiskMetrics data sets. The flavor of the calculations is similar to that for the
change of base currency described in the previous appendix. This transformation
would be done when the RiskMetrics files are read in.
Hiç yorum yok:
Yorum Gönder