The meaningful uncertainty simulation framework can enable energy firms to make better decisions
How to calculate expected future carbon costs and optimal valuation and hedging decisions, by adjusting Monte Carlo simulations for the UK market
Dynamic hedging is becoming more common among plant operators
Strategies based on commodity risk premia can be rewarding – but beware common pitfalls
The manner in which wind generation can affect the half-hourly APX price is discussed
A framework that demonstrates optimal internal pricing will deviate from ‘arm’s length principle'
A simple but realistic model to co-simulate the time series of temperature, electricity load and prices is proposed
Realistic models not necessarily a prerequisite for successful risk management
Carlos Blanco outlines an approach to counterparty risk using potential future exposure
Quant ideas paper dissects layers of valuation models for physical assets
An overview of effective methods for constructing long-term LNG forward price curves
Applying kriging to extract smooth curves from energy futures prices
Flexible, martingale duality-based method provides reliable valuation
Tracking performance of ETFs is examined, with a focus on volatility decay
Liquidity plays a vastly underappreciated role in commodity markets
Spread option pricing: importance of forex risk factors illustrated
Energy Risk presents a classic paper on swing options pricing by Patrick Jaillet, Ehud Ronn and Stathis Tompaidis, which was first published in 1998. It introduced the so-called binomial forest method, which was influential in the development of pricing...
The deregulation of Australian electricity markets has brought several challenges, including the possibility of price spikes, which expose market participants to significant risks. As Adebayo Aderounmu and Rodney Wolff outline, these spikes are hard to...
In this paper, Magnus Wobben, Tilman Huhne, Yuri Ivanov and Sebastian Hanneken examine the impact of market incompleteness on the valuation of gas storage contracts. In contrast to prior research, their proposed valuation framework accounts for the contract...
The incremental risk of including electricity contracts in a portfolio is computed by George Levy using a Monte Carlo regime-switching approach. The volume and price processes are modelled using empirical distributions and correlation is captured via...
Expected payoff maximisation is a commonly assumed strategy in valuation. S Hossein Hosseini, Qiaoyan Bian, Jay Chen and John Jiang suggest that execution strategies may vary due to complex option structures and their resulting uncertainties. Using a...
Venturing beyond historical VAR
Given the importance of the crude oil and natural gas futures markets, the intra-market correlations in these markets play an important role in pricing, hedging and managing the risks of energy portfolios. This paper by Ehud Ronn contributes to the...