Anyone involved with the generation and trading of power and gas must constantly keep an eye on the associated risks. BelVis SIM, the indispensable tool to improve business planning, identifies your commercial risks (credit/counterparty risk, price risk and volume risks) and provides risk management safeguards. BelVis SIM is also well suited to the development of business strategies.
Through the use of Monte Carlo method simulations, BelVis SIM displays not only profits and losses, but also the probability with which they may occur. The results are displayed graphically in BelVis, or returned in the form of special risk reports. BelVis SIM also calculates meaningful risk figures. The relationships between commodities are taken into consideration, and calculation may take place across multiple clients.
BelVis SIM – support for all classes of risk
Counterparty risk
Trading partner default is a significant risk particularly when trading power or gas, as the conclusion of a contract and the supply period may often be months or years apart. Ratings and trading limits are used to manage the risk. Limits to certain values may be monitored continuously.
Price risk
Risk management is meaningless without also monitoring market volatility! To manage this factor, BelVis imports current market prices and maintains them in time series: both prices from different markets, and from the same market but different suppliers (e.g. from EEX and one or more brokers). The BelVis PRO module specialises in price forecasting.
Volume risk
The very nature of volume risks means that forecasts and forecast quality are automatically part of the discussion. BelVis SIM accesses forecasts from BelVis EDM or BelVis PRO, and even uses mean values and confidence intervals from BelVis PRO ensemble forecasts. Short/long positions remain available in BelVis PFM, and are available with price evaluation for reports. Limits may be set and monitored on short and long positions. These limits may be created for all defined books.
Modern risk management using Monte Carlo method simulations
The most precise possible estimation of the future is required to calculate risk. The path to achieve this appraisal is the simulation of many thousands of possible future scenarios, followed by evaluation of the probability with which each individual scenario may occur. BelVis SIM manages this task for you:
BelVis SIM calculates the probability distribution of future profits and losses using the state-of-the-art in risk management: Monte Carlo method simulations* of forward prices, spot prices and load profiles. The comprehensive scenario simulation systematically identifies the chances and risks involved in your business and evaluates them with respect to the probability with which they may occur and the gravity of their effects. This answers questions such as:
What is the probability of making a profit in this transaction?
What is the probability that my company will sustain over 100,000 euros in losses?
Which risk can I accept, and which should I avoid at all costs?
What limits can I use to keep counterparty risk low?
Risk management methods and determination of risk figures with BelVis SIM
BelVis SIM delivers important insights through determination and evaluation of credit, price and volume risks. In addition to functions from BelVis PFM such as Mark-to-Market and Delta Risk, BelVis SIM can also calculate:
VaR (Value at Risk)
PaR (Profit at Risk)
cVaR (conditional Value at Risk)
cPaR (conditional Profit at Risk)
In combination with BelVis PFM, BelVis SIM facilitates analysis of the short, medium and long term procurement situation, as well as limit management and inspection. Limits may be specified by e.g. trading volume (total) or net positions (difference between purchases and sales), enumerated in euros or MWh.
Your advantages with Monte Carlo method simulations
You receive not only results, but also the probability with which they will occur.
Quick and easy recognition of possible profits and losses through graphical results display
Precise results through a realistic calculation basis
The risk reports provided by BelVis SIM may be configured personally or by the BelVis Consulting Team to provide a risk report meeting the specific needs of your company for the visualisation and compilation of risk figures. You can also use risk reports released by other users.
