Related papers: Variance optimal hedging with application to Elect…
Arbitrage is one important revenue source for energy storage in electricity markets. However, a large amount of storage in the market will impact the energy price and reduce potential revenues. This can lead to strategic behaviors of…
We develop a stochastic equilibrium model for an electricity market with asymmetric renewable energy forecasts. In our setting, market participants optimize their profits using public information about a conditional expectation of energy…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
This paper applies computational techniques of convex stochastic optimization to optimal operation and valuation of electricity storages in the face of uncertain electricity prices. Our valuations are based on the indifference pricing…
If a financial asset's price movement impacts a firm's product demand, the firm can respond to the impact by adjusting its operational decisions. For example, in the automotive industry, car makers decrease the selling prices of…
According to the fundamental theorems of welfare economics, any competitive equilibrium is Pareto efficient. Unfortunately, competitive equilibrium prices only exist under strong assumptions such as perfectly divisible goods and convex…
Efficiently accommodating uncertain renewable resources in wholesale electricity markets is among the foremost priorities of market regulators in the US, UK and EU nations. However, existing deterministic market designs fail to internalize…
The energy market, and specifically the renewable sector carries volatility and risks, similar to the financial market. Here, we leverage on a well-established, return-risk approach, commonly used by equity portfolio-managers and apply it…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
In two-stage electricity markets, renewable power producers enter the day-ahead market with a forecast of future power generation and then reconcile any forecast deviation in the real-time market at a penalty. The choice of the forecast…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
A minimal model of a market of myopic non-cooperative agents who trade bilaterally with random bids reproduces qualitative features of short-term electric power markets, such as those in California and New England. Each agent knows its own…
Electricity markets typically clear in two stages: a day-ahead market and a real-time market. In this paper, we propose market mechanisms for a two-stage multi-interval electricity market with energy storage, generators, and demand…
This paper addresses the question of how much to bid to maximize the profit when trading in two electricity markets: the hourly Day-Ahead Auction and the quarter-hourly Intraday Auction. For optimal coordinated bidding many price scenarios…
The presence of variable renewable energy resources with uncertain outputs in day-ahead electricity markets results in additional balancing needs in real-time. Addressing those needs cost-effectively and reliably within a competitive market…
Recently, chance-constrained stochastic electricity market designs have been proposed to address the shortcomings of scenario-based stochastic market designs. In particular, the use of chance-constrained market-clearing avoids trading off…
Electricity storage is used for intertemporal price arbitrage and for ancillary services that balance unforeseen supply and demand fluctuations via frequency regulation. We present an optimization model that computes bids for both arbitrage…
Locational Marginal Price (LMP) is a dual variable associated with supply-demand matching and represents the cost of delivering power to a particular location if the load at that location increases. In recent times it become more volatile…
We construct algorithms for computation of prices and superhedging strategies for game options in general discrete markets both from the seller and the buyer points of view.
One of the recognized principal issues brought along by the steadfast migration towards power electronic interfaced energy sources is the loss of rotational inertia. In conventional power systems, the inertia of the synchronous machines…