e·VaR: Risk Management and Control
e·VaR, e·Stress and e·IVaR collectively provide an end-to-end Risk Valuation framework
for Energy companies. The three have been specifically designed for portfolios that comprise
of complex energy instruments, where most existing risk models fail to represent Real Risk.
Its salient features include:
e·Stress: Risk under Stressed Conditions
This is an add-on module of e·VaR that allows a Risk Manager to run What-If scenarios, and compute Real Exposure under stressed conditions. The methodology employs Monte Carlo simulations for valuing market positions under correlation breakdown and extremely volatile price scenarios.
e·Stress allows the Risk Manager to define stress conditions, and to calculate Value at Risk under these conditions. This is particularly relevant, as during periods of market stress, historical correlations and volatilities no longer represent current price behaviour. e·Stress provides data for managing capital adequacy levels and in efficient resource allocation.
e·IVaR: Incremental Value at Risk
This is another add-on module of e·VaR that allows a Risk Manager to implement a Risk based Limit system on the Trading operations. This has been built specifically for the Power market, but can be extended to any commodity. Risk Exposure is calculated and presented in terms of market liquid products, and boundaries can be drawn defining the trading limit zones.
e·IVaR can be configured down to report for an individual Trader, or could be scaled up to aggregate for the entire trading desk. Real time positions can be tracked and the available limits updated online.
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