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Stable modeling in energy risk management

Author

Listed:
  • Irina Khindanova
  • Zauresh Atakhanova

Abstract

High price volatility in energy markets compels the companies to adopt and implement policies for measurement and management of the energy risk. A popular measure of risk exposure is the Value at Risk (VaR). Traditional methods of estimation of VaR used by major energy companies fail to capture the heavy tails and asymmetry of energy returns distributions. We suggest the use of stable distributions for modeling energy return distributions. The results of our study demonstrate that stable modeling captures asymmetry and heavy-tails of returns, and, therefore, provides more accurate estimates of energy VaR. Copyright Springer-Verlag Berlin Heidelberg 2002

Suggested Citation

  • Irina Khindanova & Zauresh Atakhanova, 2002. "Stable modeling in energy risk management," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 55(2), pages 225-245, May.
    • Handle: RePEc:spr:mathme:v:55:y:2002:i:2:p:225-245
    DOI: 10.1007/s001860200181
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    Citations

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    Cited by:

    1. Halkos, George & Tsirivis, Apostolos, 2019. "Using Value-at-Risk for effective energy portfolio risk management," MPRA Paper 91674, University Library of Munich, Germany.
    2. Halkos, George E. & Tsirivis, Apostolos S., 2019. "Effective energy commodity risk management: Econometric modeling of price volatility," Economic Analysis and Policy, Elsevier, vol. 63(C), pages 234-250.
    3. Halkos, George & Tzirivis, Apostolos, 2018. "Effective energy commodities’ risk management: Econometric modeling of price volatility," MPRA Paper 90781, University Library of Munich, Germany.
    4. Rafał Weron, 2009. "Heavy-tails and regime-switching in electricity prices," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 69(3), pages 457-473, July.
    5. Janda, Karel & Kourilek, Jakub, 2020. "Residual shape risk on natural gas market with mixed jump diffusion price dynamics," Energy Economics, Elsevier, vol. 85(C).

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