Energyforum
Modelling & Measuring Energy Risk
28-30 November 2007, London, UK
Day 1: Thursday November 29
9:00-9:30 Registration & Coffee/Tea
9.30-9.40 Chairman Professor Álvaro Cartea opens the conference
SPOT AND FORWARD PRICE MODELLING & TESTING
9.40-10.25 Modelling Electricity Prices
with Forward Looking Capacity Constraints
Dr. Álvaro Cartea, Birkbeck, University of London
Dr. Álvaro Cartea is a Lecturer in Mathematical Finance at Birkbeck, University of London. He is founder of the Commodities Finance Centre at Birkbeck and his research interests include energy markets, real option valuation and the pricing and hedging of financial instruments. He holds an MA in Economics and MSc in Financial Mathematics both from the University of Chicago and a Doctorate in Mathematical Finance from the University of Oxford.
10.25-10.45 Coffee and tea
10.45-11.30 UK Power Market: risks and fundamental modelling
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UK Power Market Background
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Prices drivers and influences in the market
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Price risks and how they are modelled
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Fundamental Price Forecasting
Dr. Mark A. Stewart, E.ON UK plc
Mark Stewart is Head of Market Analysis at E.ON UK, responsible for forecasting and modelling relevant energy commodity prices and demands over their traded market periods. He has over ten years' energy sector experience in mathematical modelling, risk analysis and software development (National Grid - Advantica, BG). Prior to this he completed a British Gas Scholarship PhD at Cranfield University.
11.30-12.15 Challenges in modelling high-frequency electricity prices
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Panel data analysis to identify time-dependent parameters across each half hour;
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Regime switching model which alternates between two different stochastic processes;
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Contrast performance of the model in the physical measure by contrasting the simulated four moments with the realized moments of the series;
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Price a cap option within this framework
Dr. Marcelo Figueroa, BP Oil International Ltd.
Marcelo Figueroa is Quantitative Analyst in the Risk Support and Development team in BP Oil International Ltd. His responsibilities include validation and review of existing models, research and development of new modelling techniques in power markets and in Real Option investment projects. Prior to this, he worked as an associate consultant to the energy team in Oxera (Oxford Economics Research Associates). Marcelo holds a PhD in Mathematical Finance from Birkbeck, University of London and his thesis specialized in electricity pricing models, swing options and hybrid models. He also holds an MSc degree in Mathematical Finance from the University of Oxford and a physics degree from the University of Buenos Aires, Argentina.
12.15-13.15 Lunch
13.15-14.00 Back- and side-testing of price simulation models
Henrik Specht, Vattenfall Europe AG
Henrik Specht works as a risk manager for Central Risk Management and Risk Controlling at Vattenfall Europe AG. His main tasks are the qualitative and quantitative analysis of market risk exposures in complex energy contracts and products. He is consulting different business units on efficient hedging and pricing methods. Additionally he is heading the Vattenfall Europe pricing network, where the needed price-, pricing- and risk models for Vattenfall Europe are developed. Before joining Vattenfall, Henrik worked as analyst in the Bewag energy trading department and as a research associate at the Institute for Energy Economics and the Rational Use of Energy (IER), University of Stuttgart.
14.00-14.30 Coffee and tea
ELECTRICITY, FUEL PRICE MODELLING AND PORTFOLIO MANAGEMENT
14.30-15.15 Fund of energy hedge funds portfolio management - approaches to minimizing portfolio volatility and risk
Dr. Gary M. Vasey, UtiliPoint International, Inc.
Dr. Gary M. Vasey is an acclaimed energy industry expert and has over 22 years experience in the energy and utilities industry. He currently manages UtiliPoint's European practice and is also the co-founder of the Energy Hedge Fund Center. Gary holds a B.Sc. (Hons.) degree in Geological Sciences from the University of Aston in Birmingham, England and a Ph.D. in Geology from the University of Strathclyde, Scotland.
15.15-15.45 Portfolio risk assessment for a power company
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Simulation of the portfolio management of a power company over a 3 to 5 years horizon.
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Assessment of the related risk using earnings-at-risk methodology.
Pascal Robert, Electrabel
Pascal Robert is a modeller analyst in the Strategy R&D department of Electrabel. He is, notably, in charge of performing some portfolio risk assessment studies and designing models and tools in this perspective.
15.45-16.00 Questions
19.00 Conference dinner
Day 2: Friday, November 30
9.00-9.45 Multivariate Commodity Analysis and Implications for Risk Management
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Fitting a multivariate hyperbolic distribution to energy related commodity futures (power, oil, gas, coal, carbon)
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Compute risk measures for commodity portfolios based on multivariate hyperbolic distributions
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Analyse the exposure of power plants representing such portfolios
Professor Dr. Rüdiger Kiesel, University of Ulm
Professor Dr. Rüdiger Kiesel is Director of the Institute for Mathematical Finance at the University of Ulm. Previously he has been a Lecturer and Reader for actuarial science and financial mathematics at Birkbeck College, University of London and London School of Economics, where he is still visiting professor. His main research areas are currently design and analysis of credit risk models, valuation and hedging of derivatives (credit- and energy-related), methods of risk transfer and structuring of risk (securitization), risk management (in the context of Basel II and Solvency II) and the stochastic modelling of financial markets using Lévy-type processes.
9.45-10.30 Do electricity forward prices affect hydropower scheduling?
Electricity companies owning storage hydroelectric plants have a complex task of scheduling the release of water from reservoirs. Using weekly data from 13 Norwegian power plants in the period 2000-2006, we investigate the factors that drive the production schedules.
Professor Jussi Keppo, University of Michigan
Jussi Keppo is an Assistant Professor in the Industrial and Operations Engineering Department at the University of Michigan. He teaches stochastic process and financial engineering courses. Professor Keppo has several published and forthcoming papers in the top-tier journals such as Journal of Economic Theory, Journal of Business, and Journal of Economic Dynamics and Control on topics such as investment analysis, derivative pricing, information economics, and production optimization. His research has been supported by several European and US agencies such as NSF.
10.30-11.00 Coffee and tea
COMPLEX COMMODITY DERIVATIVES
11.00-11.45 Carbon Emission Allowances as Derivatives
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We introduce a model for emissions trading in the EU ETS framework
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The borrowing rule imposes coupling between prices for carbon contracts delivering at different times
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We derive a formula for the price of the first carbon contract as function of the second contract, conditioned on the market's assessment of the shortfall probability
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To achieve this result, we rely upon recent results in the theory of incomplete market pricing
Dr. Michel Verschuere, Electrabel
Michel VERSCHUERE obtained a Ph. D. in Physics from the University of Leuven, Belgium in 2003. He worked as postdoctoral researcher at the Insitute for Financial and Actuarial Mathematics at the Technical University of Vienna in 2003-2004. Michel VERSCHUERE previously worked as risk analyst and pricing manager for European electricity and gas companies and presently leads structured trading activities for Electrabel Trading and Portfolio Management in Brussels.
11.45-12.45 Lunch
12.45-13.30 Spread and Basket Options
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Correlation hedging
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Inconsistencies in existing models
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Pricing spread and basket options analytically
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Empirical results
Aanand Venkatramanan, ICMA, The University of Reading
Aanand Venkatramanan graduated with first class Honours in Mathematics from India. As a Felix scholar he completed his Masters in Numerical Solutions of Differential Equations at the University of Reading. In October 2005 he embarked upon PhD research in mathematical finance under the supervision of Professor Carol Alexander. His current area of research includes pricing and hedging multi-asset derivative products in energy markets. Aanand now tutors the ICMA Centre's core Part I course on Quantitative Methods and conducts workshops for Part II PRM™ Evening course jointly organised by 7city, PRMIA and the ICMA Centre.
13.30-14.00 Coffee and tea
14.00-14.45 Load Duration Analysis for Gas Storage - The right flexibility at the right price
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Review of the storage services for different purposes: Trading value versus client portfolio management
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Load Duration: finding the binding constraint
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Peak versus seasonal flexibility
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Valuation of storage flexibility services
Dr. Rouven Lüscher, Nuon
Rouven Lüscher works as a quantitative analyst in the Corporate Risk Management at Nuon, the Netherlands. In addition to the development of quantitative models and risk management tools, he focuses on gas storage valuation and analyses on gas flexibility services. Rouven Lüscher obtained a Ph.D. degree in experimental physics in 2004 from the Federal Institute of Technology (ETH) in Zurich, where he also worked as a post-doctoral researcher.
14.45-15.30 Quantifying Risks in a European Gas Portfolio
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Which measure of risk, VaR vs CaR
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How to deal with correlations / cointegration
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Leveraging portfolio effects
Dr. Boris Lastdrager, Shell Energy Europe
Boris Lastdrager is Head of Quantitative Services at Shell Energy Europe, the European arm of Gas & Power. He has worked in structuring, advisory and quantitative roles in trading and Shell's Central Strategic function within the European Energy Markets. He holds a Master's degree in theoretical physics and a PhD in mathematics. His interests include structured transactions and risk synergies within deal portfolios.
15.30-15.45
Questions and Closing of the Conference
Info Brochure
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