Samuel Gruenler


Faculty Advisor: Christiane Baumeister

Risk Assessment in Energy Markets

The purpose of this project is to analyze market participants' beliefs about future movements in oil prices around important market events using option prices. Specifically, we want to assess how the risk assessment of oil companies and investors changes in response to episodes of high geopolitical tensions, oil supply disruptions, shifts in OPEC production strategies, as well as macroeconomic developments. For example, the recent Saudi-Russia oil price war and the economic crisis related to the pandemic are important events that shift people's perception of risk of the future course of oil prices. This has important implications for their behavior and the future demand for oil. We will study the probability that market participants assign to unlikely events by using options-implied probability density functions. Sam's main tasks would be to collect and clean high-frequency option price data, analyze the data by writing code to obtain option-implied probability density functions and select specific market events to examine changes in risk assessment.