Six themes that characterise trading in the energy markets today

Due to several extreme dynamics, energy traders face challenges when it comes to applying XVAs to derivatives transactions, as well as for modelling, data analytics and other processes. In a Numerix-sponsored webinar, panellists addressed XVAs and counterparty credit risk within the energy markets. This paper focuses on six key themes, including the challenges of model calibration and hedging for XVA teams, because of the turmoil in the energy markets over the past year, the increasing sophistication of modelling, and the growing use of machine learning applications. The paper discusses strategies for overcoming model calibration difficulties and hedging requirements, and highlights the importance of leveraging real-time data and sophisticated modelling to gain a competitive advantage in the energy markets, and also explores XVA usage, pricing challenges and trading trends.