Risk management

Any trading activity presents a certain risk, which, as a result of price volatility, can be enormous. The methods and procedures implemented for the assessment and control of risk in PSImarket effectively support the minimisation of risk in trading activities.

The analytic methods described below represent only a tiny fraction of PSImarket's comprehensive risk assessment and control functions.

Price forward curves (PFC) play an important role in the procedures and parameters for risk assessment. PSImarket provides extensive support for this. In the framework of mark-to-market, every transaction is evaluated in comparison to the market or a user-defined, contract-specific price curve. The value-at-risk is also calculated with a number of procedures.

Naturally, these observations also include the evaluation of options using option-specific standard models (Black, Black-Scholes) and additional models, e.g. trinomial trees for the evaluation of swing options are available.

Other implemented standard functions include the evaluation of open positions, sensitivity analysis, determination of credit risk (taking netting into consideration) as well as the determination of the risk exposure.

A comprehensive and highly flexible limit system has been implemented in risk controlling. It serves to define, allocate and monitor limits for physical and financial limits for the trading activity and the trading partner.The system supports both the "for-eyes" principle as well as transaction confirmation for deals above a defined financial volume. Additional functions are available effectively control the risk.