Managing purchase timing risk is a constant issue for wholesale power buyers. Pavel Diko reviews products that reduce this risk, proposes a lookback option that can eliminate it completely and outlines a hedging strategy for the option writer
Approfondimenti. Volatilità implicita
In certain settings it's reasonable to assume that the current futures price embodies the market expectations of the spot price. However, as Gary Dorris, Sean Burrows and Vena Kostroun explain, there are distinct situations when this assumption does not...
Developing term structure models can be tricky, as unknown factors and non-observable variables can affect futures prices. But principal components analysis is useful in tackling these problems. Here, Delphine Lautier uses PCA to pin down price movements,...
What are the theoretical consequences of restructuring electricity markets on emissions? Here, Benoît Sévi shows that changes in supply and consumption and restructuring for competition has environmental effects, and argues that strong public policies...
In this article, Niklas Hageback takes a practical look at the difficulties in reconciling regulatory and economic capital calculation in the discipline of operational risk.
Brett Humphreys and Andy Dunn outline a method to help energy companies minimise potential model risk and thereby avoid costly errors in valuing deals.
To meet the Basel II advanced measurement requirements and improve op risk management, firms must establish robust loss databases. Ulrich Anders and Jürgen Platz of Dresdner Bank in Frankfurt outline such a framework.
Are there common features among exceptional operational risks beyond their defining characteristics of rarity and severe consequences?
Could Basel II worsen recessions? By backtesting the proposed capital rules to the last recession, D. Wilson Ervin and Tom Wilde argue that the increased risk sensitivity of loan portfolio regulatory capital in the new Accord could have unwelcome systemic...