Abstract
Oil and gas companies’ earnings are heavily affected by prices fluctuations of crude oil, refined products and natural gas. The use of hedging strategies should take into account the company’s risk tolerance, which assessment has no consensual technique. The present research evaluates the risk tolerance of an oil and gas company with four approaches: Howard’s, Delquie’s, CAPM and a risk assessment questionnaire. Monte Carlo simulation with a Copula-GARCH prices modeling and stochastic optimization are used to find optimal derivatives portfolios according to the risk tolerances previously obtained. The hedging results are then evaluated with a multi-criteria model showing how this analysis can have a decisive role in the final hedging recommendation.
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Quintino, A., Lourenço, J.C., Catalão-Lopes, M. (2015). Risk Tolerance Evaluation for an Oil and Gas Company Using a Multi-criteria Approach. In: Pinson, E., Valente, F., Vitoriano, B. (eds) Operations Research and Enterprise Systems. ICORES 2014. Communications in Computer and Information Science, vol 509. Springer, Cham. https://doi.org/10.1007/978-3-319-17509-6_14
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DOI: https://doi.org/10.1007/978-3-319-17509-6_14
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