VaR and CVaR calculations for power trading books require Monte Carlo simulations across correlated price factors including power, gas, carbon, and weather, but most desks run these models overnight rather than intraday. Counterparty credit exposure and margin requirements shift rapidly when markets move, leaving hedges that were sized correctly at open materially under-hedged or over-hedged by mid-session.
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Risk Manager responsible for hedging a 2 TWh/year power trading book across spot, forward, and options instruments with EMIR margining obligations
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Risk Manager
Calculates intraday VaR and CVaR across correlated power, gas, and carbon price factors and recommends dynamic hedge ratio adjustments.
Energy Trader
Executes hedging recommendations and monitors open hedge positions against evolving market conditions throughout the trading session.
Finance/Settlement
Tracks margin calls, collateral posted, and counterparty credit utilisation across EMIR-cleared and bilateral hedging instruments.
Intraday VaR and CVaR calculation across correlated power, gas, and carbon price factors, with dynamic hedge ratio adjustment recommendations and real-time counterparty margin requirement monitoring.
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Intraday 95% one-day VaR has risen to EUR 1.42m from EUR 1.05m at open, driven mainly by carbon (48% of the move) and power price volatility (33%), with the gas leg adding the rest. The Cal-27 hedge ratio has drifted to 0.72 against a 0.85-0.95 target, leaving the book under-hedged, and one counterparty sits at 88% of its credit line. Recommend adding about 60 MW of Cal-27 forward cover and pre-positioning collateral for that counterparty.