We are a Power Retailer operating on a deregulated energy market, and we need to develop a tool for evaluation of risk exposure on the existing and / or forecasted portfolio using Monte Carlo simulation for Excel..
The tool has to allow us to:
- define risk scenarios, such as hedging contracts, books, demand curves, price indexes, selling contracts
- define the algorithm variables
The target is the Hedging Strategy Optimisation, i.e. determine the mix of derivative contracts to achieve an optimal risk / return outcome:
• Profit & Loss
• Margin calls
• Exposure calculations
• PaR etc.
In other words, given different scenarios and variables, we’d like to perform a simulation to determine the possible outcomes, and how likely are they to occur.