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Load-serving entities which procure electricity from the wholesale electricity market to service end-users face significant quantity and price risks due to the volatile nature of electricity demand and quasi-fixed residential tariffs at…
In this paper, a multivariate constrained robust M-regression (MCRM) method is developed to estimate shaping coefficients for electricity forward prices. An important benefit of the new method is that model arbitrage can be ruled out at an…
This work presents a methodology for forward electricity contract price projection based on market equilibrium and social welfare optimization. In the methodology supply and demand for forward contracts are produced in such a way that each…
The liberalization of electricity markets and the development of renewable energy sources has led to new challenges for decision makers. These challenges are accompanied by an increasing uncertainty about future electricity price movements.…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
A large fraction of the total electric load is comprised of end-use devices whose demand for energy is inherently deferrable in time. Of interest is the potential to leverage on such latent flexibility in demand to absorb variability in…
We present a new model for the electricity spot price dynamics, which is able to capture seasonality, low-frequency dynamics and the extreme spikes in the market. Instead of the usual purely deterministic trend we introduce a non-stationary…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…
Investment in renewable electricity generation is highly capital intensive and therefore strongly dependent on financing conditions. In Europe, much of this investment has occurred under public support schemes that resemble long-term public…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
Recent studies concerning the point electricity price forecasting have shown evidence that the hourly German Intraday Continuous Market is weak-form efficient. Therefore, we take a novel, advanced approach to the problem. A probabilistic…
This study deals with the pricing and hedging of single-tranche collateralized debt obligations (STCDOs). We specify an affine two-factor model in which a catastrophic risk component is incorporated. Apart from being analytically tractable,…
Contracts for Difference (CfDs) are forwards on the spread between an area price and the system price. Together with the system price forwards, these products are used to hedge the area price risk in the Nordic electricity market. The CfDs…
Accurate forecasting of the electrical load, such as the magnitude and the timing of peak power, is crucial to successful power system management and implementation of smart grid strategies like demand response and peak shaving. In…
We conduct an extensive empirical study on short-term electricity price forecasting (EPF) to address the long-standing question if the optimal model structure for EPF is univariate or multivariate. We provide evidence that despite a minor…
We propose a hybrid approach for the modelling and the short-term forecasting of electricity loads. Two building blocks of our approach are (i) modelling the overall trend and seasonality by fitting a generalised additive model to the…
Motivated by electricity markets, this paper studies the impact of forward contracting in situations where firms have capacity constraints and heterogeneous production lead times. We consider a model with two types of firms - leaders and…
Shorting for hedging exposes to risk when the market dynamics is uncertain. Managing uncertainty and risk exposure is key in portfolio management practice. This paper develops a robust framework for dynamic minimum-variance hedging that…
Electric utilities must make massive capital investments in the coming years to respond to explosive growth in demand, aging assets and rising threats from extreme weather. Utilities today already have rigorous frameworks for capital…
In this article, a multiple split method is proposed that enables construction of multidimensional probabilistic forecasts of a selected set of variables. The method uses repeated resampling to estimate uncertainty of simultaneous…