This QuantMinds in Focus presentation from Numerix’s Director of Quantitative Research, Andrew McClelland explores XVAs and counterparty credit risk for energy markets. McClelland takes a look at energy curves, e.g. natural gas futures curves, and XVA for energy portfolios – analyzing seasonality in energy curves and correlations in XVA calculations. He explores seasonality in the correlation structure, and how this should be captured via models used in an XVA setting.
Watch the presentation to get insights and commentary across several areas including:
- Seasonality in energy curve distributions & role of correlations in XVA
- The Andersen ('10) model from Cheyette ('92), some intuition & model highlights, applicability to XVA
- Quirks of calibrating seasonal models, a method-of-moments (covariances) approach
- Extensions: cross-hub basis spreads, electricity hourlies
- Refining the calibration via filtering, cross-curve correlations & historical-measure dynamics