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Sovereign Wealth Funds and Long-Term Investing$
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Joseph Stiglitz, Patrick Bolton, and Frederic Samama

Print publication date: 2011

Print ISBN-13: 9780231158633

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231158633.001.0001

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PRINTED FROM COLUMBIA SCHOLARSHIP ONLINE (www.columbia.universitypressscholarship.com). (c) Copyright University of Minnesota Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CUPSO for personal use.date: 05 June 2020

Managing Commodity Price Volatility

Managing Commodity Price Volatility

Managing Commodity Price Volatility
Sovereign Wealth Funds and Long-Term Investing

Marie Brière

Columbia University Press

Commodity price volatility continues to be one of the major risks faced by developing countries. The question is how a sovereign wealth fund (SWF) can help reduce that risk by defining an efficient asset allocation. This chapter draws a basic outline of a comprehensive framework for sovereign wealth management. The basic idea is to structure asset and liability management so that the SWF can achieve its goals in reducing the impact of commodity volatility on the government's sources of revenues. To do that, it is crucial to consider the sovereign's risk-adjusted balance sheet. The idea is to look at the assets and liabilities at their current market values and then to look at their sensitivity to the underlying market or economic risk factors.

Keywords:   sovereign wealth funds, SWF, sovereign wealth management, risk management, developing countries, asset allocation

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