Risk USA: Panelists discuss best practices in the energy market

John D'Agostino, former founding partner and chief operating officer of MotherRock, a Houston-based hedge fund that closed in August, and currently chief executive of New York-based consultancy Dagger, emphasised the difficulties in determining the proper risk metrics for energy portfolios.

"If you are trading options on natural gas, it has an asymmetric return profile. This makes the traditional value-at-risk (VAR) measurement somewhat irrelevant because VAR does a poor job in predicting tail events," he said during a panel discussion at Risk USA's derivatives and risk management conference in New York.

When asked by the audience how he adjusted his risk calculations for "fat tails", or the probability that an extreme tail event is more likely to occur than what would be predicted

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