Publication detail

Residual Shape Risk on Czech Natural Gas Market

Author(s): prof. Ing. Karel Janda M.A., Dr., Ph.D., Jakub Kourilek
Type: IES Working Papers
Year: 2018
Number: 33
ISSN / ISBN:
Published in: IES Working Papers 33/2018
Publishing place: Prague
Keywords: natural gas markets, spot prices, forward prices, residual shape risk
JEL codes: C51, C58, Q41, Q47
Suggested Citation: Janda K. and Kourilek J. (2018): "Residual Shape Risk on Czech Natural Gas Market". IES Working Papers 33/2018, IES FSV, Charles University.
Abstract: This paper introduces residual shape risk as a new subclass of energy commodity risk. Residual shape risk is caused by insufficient liquidity of energy forward market when retail energy supplier has to hedge his short sales by a non-exible standard baseload product available on wholesale market. Because of this inflexibility energy supplier is left with residual unhedged position which has to be closed at spot market. The residual shape risk is defined as a difference between spot and forward prices weighted by residual unhedged position which size depends on the shape of customers' portfolio of a given retail energy supplier. For empirical evaluation of residual shape risk we use a real portfolio of a leading natural gas retail supplier in the Czech Republic over the period 2016-2017. The size of residual shape risk in our example corresponds approximately to 1 percent of profit margin of natural gas retail supplier.
Downloadable: wp_2018_33_janda

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