Market risk
Getting protected
Insurance premiums may have rocketed for power companies over the past year but new ‘dual-trigger’ insurance products could still be an efficient way of transferring price risk. James Ockenden reports
Fighting oil volatility
Oil cartel Opec froze its production output level at its last meeting in September. With war in Iraq on the cards, Shifa Rahman reports on the future of oil volatility
Tripping around credit quality
Jack Kennedy of Standard & Poor’s looks at the effect of round-trip trades on a firm’s credit quality and how they should be treated
Build in or buy out?
Is it more cost-effective for companies to buy available systems from vendors or to develop and deploy their own energy trading and risk management solutions? Bob Bridger of Vedaris looks into the dilemma faced by many companies
Going short under the SMD
Scott Greene, Mark Niehaus and Pankaj Sahay of PricewaterhouseCoopers look at the effect of settling a short position in the day-ahead market under the Federal Energy Regulatory Commission’s proposed standard market design
Doing the maths: physical value-at-risk
ABB’s William Rutz and Bob Fesmire investigate new tools that calculate physical value-at-risk based on simulations of generating resources and power transactions
A joint state-space model for spot and futures power
Portfolio-wide risk management requires a model that accounts correctly for correlations between the spot asset and various futures products. Kjetil Kåresen and Egil Husby discuss a joint multi-factor model for power spot and futures prices and show how…
How to gain from risk premia
Brett Humphreys examines historic data for the natural gas market and finds smart traders could make money from hidden risk premia
The three-way knock-on effect
Peter Nance and Lin Franks look at the interplay between market, credit, and operational risks and consider how firms might approach implementing an integrated company-wide system to tackle them
From Enron to Iraq
The freight derivatives market has ridden out the loss of market-maker Enron, and now all eyes are turning to the effect of military action against Iraq. By Kevin Foster
Keeping EAR simple
Brett Humphreys discusses how trading groups can be captured within earnings-at-risk and cashflow-at-risk models. He suggests taking a top-down approach instead of a bottom-up approach based on actual positions
Close-up on market risk capital
Jack Kennedy outlines rating agency Standard & Poor’s new approach for analysing the credit quality of US energy trading firms
Estimating oil price volatility: a Garch model
Nikolai Sidorenko, Michael Baron and Michael Rosenberg present a general framework for modelling energy price volatility. These models explain the volatility persistence and clustering present in many commodity prices. In addition, they can incorporate…
Managing risk under SMD
Scott Greene, Mark Niehaus and Pankaj Sahay examine the impact of Ferc’s proposed standard market design on power risk management
Through the looking glass
Unlike oil and natural gas, electricity generally suffers poor price transparency. Rachel Jacobson of FAME Information Services looks at power price discovery mechanisms in the US
Balancing the books
Regulators are taking advantage of a lull in power project development in the US to close loopholes in financing rules, reports Catherine Lacoursière
Out of the zone: nodal pricing takes hold
Congestion-constrained US electricity markets are likely to find relief with the arrival of a new pricing regime, reports Catherine Lacoursière