Six Themes that Characterize Trading in the Energy Markets Today

Due to several extreme dynamics, energy traders face particular challenges when it comes to applying XVAs to derivatives transactions, as well as for modelling, data analytics, and certain processes. Based on a discussion by expert panelists, this paper explores certain trends and themes tied to today’s energy markets, including:

• The challenges of model calibration and hedging for XVA teams.
• The increased sophistication of modelling.
• The use of machine learning applications.
• The use of particular XVAs.
• The lack of jump processes for XVAs.
• The increasing application of risk adjusted rates of return.