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Electro-energetics - managing new risks


  • Tomáš Horník
  • Ota Drahovzal


One of the most significant changes in power industry was the start of trading on Prague Energy Exchange. This new phenomenon on the Czech electricity market brings some different types of risks in real life. In this paper are discussed topics concerning credit risk, market price risk and foreign exchange risk. In the part of credit risk there are introduced issues covered the introduction to the whole credit risk mechanism, the split of the risk between different risk holders and the tools serving to the risk mitigation. The market risk includes primarily the risk connected with the actual value of the futures contracts and its possible change, furthermore the liquidity and margining requirements due to market changes and mark to market evaluation are described. The foreign exchange risk derives from the fact that the price of exchange contracts and the payments are in euros, but the domestic currency is Czech crown. In focus are the possible changes in the contact value nominated in crowns due to exchange rate volatility, without any certain presumable trend. The models used to demonstrate the impact of the above mentioned factors are based on the Monte Carlo simulation methodology. Each demonstration uses a simple example, which clarifies the assumptions on which the simulations are calculated.

Suggested Citation

  • Tomáš Horník & Ota Drahovzal, 2008. "Electro-energetics - managing new risks," Ekonomika a Management, University of Economics, Prague, vol. 2008(3).
  • Handle: RePEc:prg:jnleam:v:2008:y:2008:i:3:id:42

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    References listed on IDEAS

    1. Garrouste, Pierre & Saussier, Stephane, 2005. "Looking for a theory of the firm: Future challenges," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 178-199, October.
    2. Williamson, Oliver E, 1973. "Markets and Hierarchies: Some Elementary Considerations," American Economic Review, American Economic Association, vol. 63(2), pages 316-325, May.
    3. repec:mes:jeciss:v:21:y:1987:i:1:p:528-530 is not listed on IDEAS
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    Cited by:

    1. Igor Paholok, 2015. "Credit Value Adjustment and Economic Motivation to Trade on PXE," Prague Economic Papers, University of Economics, Prague, vol. 2015(3), pages 245-259.

    More about this item


    Energetika; Energetics; Simulation; Simulace; Energetická burza; Energy exchange;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General


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