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

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