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The presentation addresses the peculiar circumstances in the energy markets and the relevant modeling strategies. I will stress the differences in modeling approaches between financial and energy markets. The presentation is not an overview of specific energy structures or of specific models. The presentation attempts to show how the availability of liquid underlying risks drives pricing and modeling choices. Among others, I will address the following issues:
- What is risk management? Integration of real options and proprietary trading.
- Scarcity of data and need for robust modeling
- The proper use of forward-looking and historical information
- The proper use of price and non-price information
- Models as tools vs. models as "the truth": model what you can, and not what you want
- Real options and tradable risks
- Hedging of real options: static and dynamic decomposition in terms of tradables.
- Correlation and dependence modeling
- Physical assets: interaction of dispatch, hedging and valuation
Short Bio:
Krzysztof Wolyniec is the Director of Research at Mirant Corporation. He is responsible for modeling power and fuel markets as well as developing hedging and trading strategies around physical power and fuel assets. He holds graduate degrees in Physics and Operations Research from the University of Gdansk and the University of Rochester.
