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CIO Springer TAP Compal BES FCT
FA5 Modeling energy commodity derivative
Session organizer: Raimund Kovacevic, University of Vienna, Austria

Chair: Raimund Kovacevic, University of Vienna, Austria
Room 3.1.6


Stress-testing for portfolios of commodity futures with extreme value theory and copula functions

Florentina Paraschiv (
In this paper, we performed a stress-testing for a portfolio of commodity futures, which mimics the dynamics of the DJ-UBS index. We identified extreme events that impacted commodity prices over time, and looked at correlation structures in a dynamic way, with copula functions. In line with Basel III financial regulations, we derived baseline, historical, and hybrid scenarios and discussed their advantages and shortfalls. We found that the financialization of commodity markets led to an increase in correlations and in the probability for joint extremes. However, we identified structural breaks in commodity markets that temporarily led to a breakdown of expected statistical patterns and of traditional dependence structures among commodities. This fact shows the need for forward-looking stress testing techniques, like hybrid and hypothetical scenarios, as encouraged by financial regulators.

Keywords: Extreme value theory, Commodity futures, Stress testing


The impact of renewable energies on EEX day-ahead electricity prices

Florentina Paraschiv (, Michael Schuerle (
We analyze the impact of renewable energies, wind and photovoltaic, on the formation of day-ahead electricity prices at EEX. We give an overview of the policy decisions concerning the promotion of renewable energy sources in Germany, and discuss their consequences on day-ahead prices. An analysis of electricity spot prices reveals that the introduction of renewable energies enhances extreme price changes. In the frame of a dynamic fundamental model, we show that there has been a continuous electricity price adaption process to market fundamentals. Furthermore, the fundamental drivers of prices differ among hours with different load profiles. Our results imply that renewable energies decrease market spot prices and have implications on the traditional fuel mix for electricity production.

Keywords: Energy markets, renewable energies, day-ahead prices


Swing Option Pricing by bilevel optimization

Raimund Kovacevic (, Georg Pflug (
Swing options are an important type of flexible energy delivery contracts. Due to nonstorability and imcompleteness of eletricity markets, electricity swing options are difficult to price by purely financial approaches. We formulate the pricing problem as a bilevel decision problem (Stackelberg game) and present related optimality conditions and solution algorithms

Keywords: bilevel optimization, swing option pricing, stochastic optimization