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Finance, Insurance, Energy, Weather and Stochastics

FINEWSTOCH (Finance, INsurance, Energy, Weather and STOCHastics) is an ISP funded by the Research Council of Norway. 

Project summary

The gradual change from carbon-intensive to renewable energy sources poses new and interesting challenges. Norway's large oil industry and clean hydro power generation place us on both sides of the fence in the current European "Energiewende". Our economy faces financial risk from investments through the "Oil fund", but also from the volatility of oil and gas prices. On the other hand, renewable energy sources introduce a risk exposure towards weather on the supply side, which impacts prices and production. With gradual market interconnections, and the planned unification of Europe's energy grid, various weather factors like wind, temperature, precipitation and cloud cover will become major price drivers.

Global climate change with extreme weather and the new situation in energy have attracted the insurance industry to offer new products, like weather-linked insurance and catastrophe bonds. We observe an integration of finance, insurance and energy, which is also taking place scientifically.

The purpose of the ISP-project "Finance, Insurance, Energy, Weather and Stochastics" (FINEWSTOCH) is to develop new theory for solving problems motivated from finance and energy. Quantification of risk through stochastic dynamic models and analysis of decisions under uncertainty will be the key issues we focus on. With decisions, we think of management of large financial portfolios or risk diversification and hedging in the energy sector. The project is divided into three work packages: "Probability theory for non-semimartingales in time and space, and applications", "Stochastic partial differential equations and applications" and "The stochastics of energy and weather markets".

FINEWSTOCH will lead to a strengthening of the research group in stochastics, energy and insurance mathematics in Oslo, developing the national network as well as maintaining the international connections. Industry will benefit from better methodology for risk management and excellent master/PhD graduates.

 

Financing

This project is financed by the Reseach Council of Norway. Funding ID: 239019

 

Published July 6, 2015 8:23 AM - Last modified July 6, 2015 8:30 AM