Development and modeling of risk scenarios

One of the tasks of the customer, a power exchange, is to hedge the traded derivatives by depositing financial collateral. For the successful implementation of this risk management, the amount of collateral must first be determined.

As part of the analysis, various risk scenarios were developed and their influence on the future price of electricity was investigated. In addition to the development of appropriate and reasonable scenarios, suitable input parameters as well as a modeling of the electricity market had to be performed so that a well-founded analysis and determination of the financial collateral could be made.

E-Bridge assisted the client in developing the scenarios and performed modeling of the electricity market. In a first step, the scenarios were checked for completeness and plausibility. Subsequently, the input parameters for the electricity market model were defined. In parallel, an implemented electricity market model was to be evaluated in terms of functions and output. For this purpose, a method was developed to derive the hourly prices of the model in derivative products. The goal was to determine the influence of the risk scenarios on the electricity price.

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