ANALYSIS OF RISK IN THE LIVESTOCK OF THE STATE OF RIO DE JANEIRO AND BRAZIL BETWEEN JANUARY 2007 AND MARCH 2020

Abstract

The article aims to analyze the exposure to risks that livestock farmers in the state of Rio de Janeiro face to Brazil using the Value at Risk (VaR) metric as a measure of risk and price return for cattle from January 2007 to March 2020, providing an expanded information that allows for presenting the level of risk of the activity between the analyzed states and comparing their levels. Through this metric, it is possible to have the total volume of losses that can occur for different types of assets and portfolios, including commodities. The results showed that ranchers in the state of Rio de Janeiro are exposed to a greater probability of financial losses when compared to other Brazilian ranchers. While in the state of Rio de Janeiro there is a 95% probability of finding maximum losses in investment of 4.81%, in Brazil the maximum losses were 3.09% for the 95% statistical confidence level. Finally, the non-parametric VaR metric of historical simulation proved to be a valuable tool in the risk management of livestock.