Keeping score

This month Brett Humphreys and Zach Jonasson show how energy trading firms can compare performance using publicly available corporate information

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Many companies have active energy trading divisions. These divisions generally have a minimal upfront investment, especially when compared to the cost of, say, building a new power plant. Trading entails an unknown cash investment in the future – risk capital, or the amount of capital it might lose from trading activities.

While companies generally understand charging business units for the cash capital they use, few have a good grasp of how to charge for the risk capital used. Even if they

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