G1 - General Financial MarketsReturn

There is a need to focus on electricity derivative trading, because this is an important and expanding field. The aim of this paper is long-term forecasting of the daily futures prices. Two approaches were used for this, namely the use of spot price forecasting to model the future prices and forecasting future prices directly. We will show on an EEX case study that better results can be achieved by the first approach, where we use mean-reverting, jump-diffusion and regime-switching models for spot price forecasting. The best results of spot price forecasting are achieved by the jump-diffusion model, where we will present the benefit of the use of filtered calibration data.

This article is devoted to the banking sector regulation in the European Union and worldwide. The banking regulation is used to control banking risk activities and sustainable portfolio growth. Basel Committee on Banking Supervision (BCBS) coordinates this regulation process and supervision in the world. BCBS prepared the latest regulation called Basel 3. The European Union implemented Basel 3 with legislative package called CRD IV. We describe Basel 3 and CRD IV provisions with focus on capital adequacy, liquidity and leverage. CRD IV improves the capital quality and brings new capital buffers for systemic important institutions and systemic risk, conservative buffer and countercyclical buffer. CRD IV strengthens liquidity and leverage regulation. There are introduced three controlled ratios: liquidity coverage ratio (LCR) for short-termed liquidity, net stable funding ratio (NSFR) for long-termed liquidity and leverage ratio (LR) for leverage analysis. They are calibrated. There are described differences among these documents. Finally, we sum up assessment studies about Basel 3 and CRD IV impact on the European banking sector and economy.

Over the past few years, the Value at Risk indicator (VaR) has evolved, without doubt, into the most frequently used comprehensive tool for assessment of potential losses caused by adverse changes in market rates. However, the common models used for VaR assessment are based only on mid prices and do not take into account the existence of time-varying bid-ask spreads. In addition, they assume that any amount of instruments can be sold almost immediately without an adverse impact on prices. Thus, they focus only on pure market risks without taking into account the market liquidity. As a consequence, they underestimate the total risk.
This paper focuses on the importance of market liquidity and describes ways to integrate it into the VaR calculation.