STABLE MODELING OF ENERGY RISK

摘要

The highly volatile nature of energy markets makes it imperative for players on these markets to be able to precisely measure and manage the energy risk. A common measure of risk exposure is the Value at Risk (VaR). Traditional methods of estimating VaR used by major energy companies fail to capture the heavy tails and asymmetry of energy returns distributions. This study proposes the evaluation of energy VaR on the basis of stable distributions. Our analysis illustrates that stable modeling of energy VaR provides more accurate risk estimates.