Extending value at risk to a corporate setting : an application to Fonterra Cooperative : a thesis presented in partial fulfillment of the requirements for the degree of Master of Business Studies in Finance at Massey University

Abstract

This paper demonstrates the development and application of a corporate Value-at-Risk model. Using the RiskMetrics Group's CorporateMetrics as a starting point we show how the framework can be modified to meet the specific needs of Fonterra Cooperative, a major New Zealand dairy exporter. We develop a Monte-Carlo simulation model that uses univariate ARIMA and multivariate Vector Error Correction (VECM) forecast models to estimate the Value-at-Risk on Fonterra Group Treasury's interest rate and FX hedge portfolio over a 15-month period.