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Shape risk
Shape risk
in finance is a type of basis risk when hedging a load profile with standard hedging products having a lower granularity. In other words a commodity supplier wants to pre-purchase supplies for expected demand, but can only buy in fixed amounts that are bigger than the demand forecasted. This means it has to either over order or under order and make up the difference at the time of delivery at the spot price which might be much higher. Shape risk
Shape risk
is also related to commodity risk. For example an electricity provider has to produce or buy electricity in advance in order to distribute to its consumers based on forecasts i.e. how much energy will be consumed every minute on the following day. Such forecasts are usually based on the average historical consumption of the same set of customers; however, the provider can only produce e.g. only hourly blocks of electricity of 1MWh, and not smaller quantities. There is a certain financial risk that the provider produces too less energy and thus has to buy the remaining power from a market opponent for a high spot price to be able to fulfill the need of its customers.[1] References[edit]

^ Bokermann, Markus (Jan 2009). Kompaktwissen Strom- und Gashandel. Düsseldorf: Euroforum Verlag GmbH. 

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v t e

v t e

Financial risk
Financial risk
and financial risk management

Categories

Credit risk

Concentration risk Consumer credit risk Credit derivative Securitization

Market risk

Commodity risk
Commodity risk
(e.g. Volume risk, Basis risk, Shape risk, Holding period risk, Price area risk) Equity risk FX risk Margining risk Interest rate risk Volatility risk Liquidity risk
Liquidity risk
(e.g. Refinancing risk)

Operational risk

Operational risk
Operational risk
management Legal risk Political risk Reputational risk Valuation risk

Other

Profit risk Settlement risk Systemic risk

Modeling

Market portfolio Modern portfolio theory RAROC Risk-free rate Risk
Risk
parity Sharpe ratio Value-at- Risk
Risk
(VaR) and extensions Profit at risk, Margin at risk, Liquidity at risk

Basic concepts

Diversification Expected return Hazard Hedge Risk Risk
Risk
pool Systematic risk

Financial economics Investment management Ma

.