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We will have a research talk in the area of Quantitative and Computational
Finance by Dr. Vincent Kaminski from Enron Corp. at 11am on Thursday,
November 1. 2001. Dr. Kaminski will also meet with students associated
with the MS QCF program at 2:00 pm on Thursday in Room 223 in the ISyE
Building for discussion and questions.
Seminar title:
Measurement of Volatility in the Energy Markets
Speaker:
Dr. Vincent Kaminski
Managing Director and Head of Research, ENRON
Time: 11:00 am, Thursday, November 1, 2001
Room 215, Instructional Center Building
Outline of the talk:
1. Importance of volatility in financial engineering
a. option pricing
b. risk management
c. legacy software systems
2. Is volatility the right tool for energy markets?
3. The dynamics of energy prices in the US markets in recent years:
a few stylized facts
4. Alternative theoretical tools to represent price dynamics:
the importance of dialogue between academics and practitioners
Background:
The last few years have been characterized by exceptionally high volatility
of the power prices in the US markets. The market developments have
created a number of unique challenges for energy industry economists.
One immediate question is 'how should the volatility of energy prices be
measured. Although it is agreed upon that the prices in the power markets
are characterized by high variability, the traditional measures used in
financial economics (annualized standard deviation of log price
returns) may not fit well for electricity prices. The second challenge is to
explain the sources of high price volatility and to answer the question to
what extent can this high price volatility be attributed to problems
that can be addressed in the long run.' Such problems include flaws
in market design that allow some market participants to abuse market power,
limited availability and/or unequal access to transmission, and temporary
shortages of generation capacity. Some factors underlying high volatility of
electricity prices may be of a permanent nature and may be a necessary
price to pay for increased market efficiency and expanded customer choice.
The Speaker:
Vincent (Vince) Kaminski is Managing Director and Head of Research for
Enron. Vince joined Enron in June of 1992. Previously, Vince was a Vice
President in the research department of Salomon Brothers in New York (Bond
Portfolio Analysis Group) and a manager in AT&T Communications (Long
Lines) in Bedminster, New Jersey. In his current position, Vince is
responsible for development of analytical tools for pricing of commodity
options and other commodity transactions, hedging strategies, optimization
of financial and physical transactions, as well as development of
value-at-risk system. Enron Capital & Trade Resources manages the largest
portfolio of fixed-price and derivative natural gas contracts in the world
and has invested a lot of time and effort in the development of state-
of-art risk management systems.
Vince is a recipient of the 1999 James H. McGraw Award for Energy Risk
Management (Energy Risk Manager of the Year). Vince holds an M.S. degree in
international economics and a Ph.D. degree in mathematical economics from the
Main School of Planning and Statistics in Warsaw, Poland, and an MBA from
Fordham University in New York.
