2006 | OriginalPaper | Chapter
Risk Measurement Methods
Author : Stefano Fiorenzani
Published in: Quantitative Methods for Electricity Trading and Risk Management
Publisher: Palgrave Macmillan UK
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Market risk is a complex subject with multiple dimensions and implications for electricity business activity. Analytical risk measures such as traditional Greek measures or high-order and cross-sensitivities allow us to control in detail market risk, but sometimes these analytical risk measures are too technical to be understood by non-technical staff or by management. Hence, it is necessary to make a synthesis of the information contained in analytical measures into a more intelligible form. The natural way of creating such a type of risk measure is of course that of assessing the impact of risky events in monetary terms, because non-technical people are also capable of understanding the meaning of a potential monetary (or economic) loss.