Risk Measures in Multi-Horizon Scenario Trees

Adrian S. Werner (), Alois Pichler, Kjetil T. Midthun, Lars Hellemo and Asgeir Tomasgard
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Adrian S. Werner: SINTEF Technology and Society
Alois Pichler: Norwegian University of Science and Technology (NTNU)
Kjetil T. Midthun: SINTEF
Lars Hellemo: SINTEF
Asgeir Tomasgard: Norwegian University of Science and Technology (NTNU)

Chapter Chapter 8 in Handbook of Risk Management in Energy Production and Trading, 2013, pp 177-201 from Springer

Abstract: Abstract Production assurance requirements are used to ensure that the operation of natural gas transportation networks is robust with respect to flow and production disruptions. They also affect strategies for optimal infrastructure investments. Motivated by a combined investment and operational optimization model for natural gas transport, we describe how to address such requirements through risk measure formulations such as Average Value-at-Risk. The large number of operational scenarios required for a meaningful analysis of the risk measures creates a computational challenge. A new scenario tree structure, multi-horizon scenario trees, can improve computational tractability. We investigate properties of the risk measures such as time consistency for such scenario trees and illustrate this discussion with a stylized example.

Keywords: Risk Measure; Scenario Tree; Chance Constraint; Time Consistency; Operational Scenario (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/978-1-4614-9035-7_8

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