Volume risk

Volume risk is a commodity risk which refers to the fact that a player in the commodity market has uncertain quantities of consumption or sourcing, i.e. production of the respective commodity.^[1] Examples of other circumstances which can cause large deviations from a volume forecast are weather (e.g. temperature-changes for gas consumption), the plant-availability, the collective customer outrage, but also regulatory interventions.

Example

A electricity retailer cannot accurately predict the demand of all house holds for a given time which is why the producer cannot forecast the precise time that a power plant will provide more electricity that consumed, even if the plant always delivers the same output of energy.

References

↑ Kandl, Peter; Studer, Gerold (January 2001). "Factoring in volume risk". Risk magazine: 84f. Retrieved 23 October 2015.

Financial risk and financial risk management

Categories

Credit risk	Concentration risk Consumer credit risk Credit derivative Securitization

Market 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 (e.g. Refinancing 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 parity
Sharpe ratio
Value-at-Risk (VaR) and extensions Profit at risk, Margin at risk, Liquidity at risk

Basic concepts

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