Energy Trading and Risk Management with MATLAB

Ameya Deoras

MATLAB in Energy Trading

Case Study: Generation Asset Risk Analysis

Simulation of Natural Gas and Electricity Prices Simulation of plant dispatch to generate cash-flows Plant valuation and risk measurement

Additional Resources Q&A

Demo: Generation Asset Risk Analysis

Goal:
Develop a tool for fast and easy computation of Cash-flow at risk for a portfolio of gas-fired plants

Requirements:
Easy to use interface Powerful computation engine

Generation Asset Risk Analysis

Goal: Develop a tool that can be used for fast and easy computation of Cash-flow at risk for a portfolio of gas-fired plants
Natural Gas Model
Mean reverting SDE

Temperature Model
Parametric non-linear Simulated Temperatures

Simulated Natural Gas Prices

Electricity Model
Hybrid Seasonal Patterns Simulated Electricity Prices

Dispatch Algorithm
Simulated Cash-flows

Cash-flow at Risk
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Business Challenges

Inability to customize models

Long development time

Need for complex, numerically-intensive computations Time and cost of deploying applications

Computational Finance Workflow

Access
Files Data Analysis & Visualization

Research and Quantify

Share
Reporting

Databases

Financial Modeling

Applications

Datafeeds

Application Development

Production

Automate
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Task 1: Modeling Natural Gas Prices

Natural Gas Model
Mean reverting SDE

Temperature Model
Parametric non-linear Simulated Temperature

Electricity Model
Hybrid Seasonal Patterns Simulated Natural Gas Prices Simulated Electricity Prices

Dispatch Algorithm
Simulated Cash-flows

Cash-flow at Risk

Task 1: Modeling Natural Gas Prices

Goal: Calibrate & Simulate a MeanReverting Brownian Motion Model

Task 2: Modeling Temperatures

Natural Gas Model
Mean reverting SDE

Temperature Model
Parametric non-linear Simulated Temperature

Electricity Model
Hybrid Seasonal Patterns Simulated Natural Gas Prices Simulated Electricity Prices

Dispatch Algorithm
Simulated Cash-flows

Cash-flow at Risk

Task 3: Modeling Electricity Prices

Natural Gas Model
Mean reverting SDE

Temperature Model
Parametric non-linear Simulated Temperature

Electricity Model
Hybrid Seasonal Patterns Simulated Natural Gas Prices Simulated Electricity Prices

Dispatch Algorithm
Simulated Cash-flows

Cash-flow at Risk

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Task 4: Simulation & Dispatch

Natural Gas Model
Mean reverting SDE

Temperature Model
Parametric non-linear Simulated Temperature

Electricity Model
Hybrid Seasonal Patterns Simulated Natural Gas Prices Simulated Electricity Prices

Dispatch Algorithm
Simulated Cash-flows

Cash-flow at Risk

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Computational Finance Workflow

Access
Files Data Analysis & Visualization

Research and Quantify

Share
Reporting

Databases

Financial Modeling

Applications

Datafeeds

Application Development

Production

Automate
12

MATLAB solutions

Flexible modeling environment

Viewable-source functions Customizable algorithms

Quick Prototyping Environment

Extensive library of algorithms Fast and efficient to develop, debug, and optimize programs

Fast Computational Engine

Optimized for matrix operations Powerful engine for Monte Carlo simulation

Easy to Integrate and Deploy

Easily deploy for use with other programs such as Excel Royalty free deployment

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Additional Resources

Recorded webinars:
RWE AG Integrates a MATLAB Based Energy Pricing Engine with SAP
Credit Risk Modeling with MATLAB Application Deployment with MATLAB

and others, at http://mathworks.com/recordedwebinars

User stories:
Horizon Wind Energy Develops Revenue Forecasting and Risk Analysis Tools for Wind Farms UNION FENOSA Predicts Energy Supply and Demand Using MathWorks Tools and others, at http://mathworks.com/energy-production
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Questions?

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