Managing Energy Price Risk
First published:
ISBN: 9781782722090
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Credit in the Energy Markets
Craig Enochs
Credit in the Energy Markets
Introduction
May You Live in Interesting Times
The Dodd–Frank Act and its Impact on the Energy Industry
Assessing Regulatory Risk
Introduction to Price-Reporting Agencies
Fundamental Data in Energy Markets
European and Asian Natural Gas Market Developments – Swamped by the Present?
US Natural-Gas Markets
Managing Oil Price Risk: Dealing with the Time-Varying Relationship between the Price of Oil and Fundamentals
Electricity Markets: US
European Electricity Markets: Part I
European Electricity Markets: Part II
Coal
Energy Real Options: Valuation and Operations
Commodity-Based “Swing” Options
Gas Storage Pricing and Hedging
Valuation and Risk Management of Physical Assets
Arbitrage-Free Valuation of Energy Derivatives
Introduction to Value-at-Risk
Introduction to Portfolio Value-at-Risk
Introduction to Default Risk and Counterparty Credit Modelling
Credit Risk in Power and Gas Markets
Credit in the Energy Markets
Energy markets, once regional, are now interconnected in a global web. As energy markets grow and mature, standardisation is increasingly the norm to reduce industry risk, whether in operational procedures or contractual documentation. However, credit risk is a lingering problem and the mitigation of credit risk continues to be a focus of the energy commodity markets. High-profile bankruptcies of creditworthy entities and the need to do business with strategic counterparties that are not creditworthy combine to create an environment without a perfect credit solution or way to completely eliminate credit risk. As the energy markets have evolved, the credit tools used by market participants have likewise evolved, and this evolution is reflected in the migration to the International Swaps and Derivatives Association (ISDA) Master Agreement (“ISDA Master Agreement”) and the ever-expanding roster of potential credit risk reduction measures.
This chapter will address the evolution of credit in the energy markets, credit risks that still exist, credit tools used in the energy markets and the migration of energy market participants to the ISDA Master Agreement.
EVOLUTION OF CREDIT IN
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