Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203212 
Year of Publication: 
2018
Series/Report no.: 
IES Working Paper No. 33/2018
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Abstract: 
This paper introduces residual shape risk as a new subclass of energy commodity risk. Residual shape risk is caused by insufficient liquidity of energy forward market when retail energy supplier has to hedge his short sales by a non-exible standard baseload product available on wholesale market. Because of this inflexibility energy supplier is left with residual unhedged position which has to be closed at spot market. The residual shape risk is defined as a difference between spot and forward prices weighted by residual unhedged position which size depends on the shape of customers' portfolio of a given retail energy supplier. For empirical evaluation of residual shape risk we use a real portfolio of a leading natural gas retail supplier in the Czech Republic over the period 2016-2017. The size of residual shape risk in our example corresponds approximately to 1 percent of profit margin of natural gas retail supplier.
Subjects: 
natural gas markets
spot prices
forward prices
residual shape risk
JEL: 
C51
C58
Q41
Q47
Document Type: 
Working Paper

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