Despite being a multitrillion-dollar global industry, energy markets have yet to adopt industry-standard, widely accepted methods for XVA pricing, model analytics and risk management.

As the energy sector has recently experienced extreme fluctuations in price and other dynamics due, in part, to pandemic-related and geopolitical effects, in this paper we look at some of the challenges energy traders face when seeking to apply XVAs to their derivatives transactions.

A number of key factors are addressed, including:

  • Why applying XVAs in the energy markets is significantly different than traditional asset classes.
  • The nuances of the energy space including client credit profiles and credit data sparsity.
  • Unique factors such as physical delivery, weather, seasonality, and storage.
  • How volatility and frequent boom-and-bust cycles can mean outsized instability of XVAs.
  • The impact of issues such as curve seasonality.
  • How the transition to renewable energy increases data complexity for XVAs.
  • Cloud computing as a key differentiator in meeting the data analytics requirements of the energy market.

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white paper

White paper | The Value of Managed Services for Trading and Risk Management