This is a practical playbook of desk–quant conversations in power, gas, and hydro.

Use it to learn:

  • how products are discussed,
  • how risk is explained,
  • how implementation details leak into PnL.

Start with Scene 1 (incident response) or Scene 5 (risk pack logic).

Scenes

Scene 1 — What exactly did we lose money on?

A Friday loss triggers the only question that matters: market move or engine move. Residual PnL is treated as a diagnosis problem, not a bucket. Focus: provenance (snapshot/model/run IDs), data vs model vs mapping vs lifecycle.

Scene 2 — Afternoon whiteboard: Start from payoffs, please

They rebuild the stack from first principles: payoff → model → numerics → risk numbers → hedges. The goal is alignment on product definitions and conventions before debating methods. Focus: hedgeable coordinates, no-arbitrage checks, and why flex risk is policy-driven.

Scene 3 — From contracts to curves, seasonality, and mean reversion

Curves are not “a number”. They are structure: winter–summer, peak–base, and profile. Mean reversion is framed as an exercise-timing driver, not a modelling slogan. Focus: shape risk, regimes (short end vs long end), and boundary movement as hidden PnL.

Scene 4 — Optionality, numerics, and calibration fights

Storage, swing, and hydro are written as control problems: state, decision, constraints. Numerics trade accuracy, speed, and stability; calibration is a governance promise. Focus: failure modes (kinks, discretisation, LSMC instability), and versioned artefacts.

Scene 5 — Risk reports: VaR, stress, scenarios, sensitivities

The risk pack is decoded into what it actually claims and what it hides. VaR/ES are treated as local tail metrics; scenarios are the desk-actionable layer. Focus: factor mapping, netting caveats, policy-aware repricing, and a defensible talk track.

Scene 6 — Disagreement about hedging

A “delta hedge failed” incident becomes a forensic exercise: bucket definition, basis, non-linearity. A single winter delta is exposed as insufficient when shape and regime shifts matter. Focus: month-level deltas, basis flags, shape scenarios, and hedge mapping.

Scene 7 — Hydro and dynamic programming

Hydro is reframed from “calls on power” to “inventory of generation rights”. Water value becomes opportunity cost under uncertainty and constraints. Focus: DP loop, inflow scenarios, risk-aware optimisation, and operational narratives for management.

Scene 8 — Wrapping up expectations and deliverables

They make the operating contract explicit: what the desk needs and what quant needs. The key control is governance of change: no silent releases and impact runs. Focus: acceptance criteria, deliverables, and shared ownership across risk forums.

How to use this playbook

  • If you want incident handling, read Scene 1 → Scene 4.
  • If you want risk governance, read Scene 5 → Scene 8.
  • If you want hydro intuition and narrative, start at Scene 7.