Basket payment combined with Markowitz portfolio applied to commodity trade
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Date
2014
Journal Title
Journal ISSN
Volume Title
Publisher
Publishing House of Lviv Polytechnic National University
Abstract
The article presents a method for expressing the value of commodities on world markets (petroleum products) as a function of a basket of currencies or a basket of precious metals (Gold and
Silver) and compares their performance with a Markowitz portfolio of the underlying. The method of
basket payments can be used as a tool for diminishing the riskiness of forward transactions on commodities markets. By establishing a model of payment based on
the baskets, we propose to liberate the payment rules from disadvantages inherent in the use of official
currencies. After minimizing the price variability of individual commodities by using instrumental (basket)
prices, we propose to construct Markowitz portfolios of the commodities to reach further reduction of the
forward transactions riskiness. Results of applying of the idea to selected petroleum products are shown.
Description
Keywords
basket payments, Markovitz portfolio, commodity trade
Citation
Basket payment combined with Markowitz portfolio applied to commodity trade / J. T. Duda, A. Augustynek, M. Fuk, I. V. Borshchu // Economics, Entrepreneurship, Management. – 2014. – Volume 1, number 1. – P. 67–73. – Bibliography: 12 titles.