Related papers: Energy price risk management
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. The possibility of extreme price movements increases the risk of trading in electricity markets. However, underlying the…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…
In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…
Forecasting electricity prices is a challenging task and an active area of research since the 1990s and the deregulation of the traditionally monopolistic and government-controlled power sectors. Although it aims at predicting both spot and…
An increase in energy production from renewable energy sources is viewed as a crucial achievement in most industrialized countries. The higher variability of power production via renewables leads to a rise in ancillary service costs over…
Increased penetration of wind energy will make electricity market prices more volatile. As a result, market participants will bear increased financial risks, which impact investment decisions and in turn, makes it harder to achieve…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
In an electric power system, demand fluctuations may result in significant ancillary cost to suppliers. Furthermore, in the near future, deep penetration of volatile renewable electricity generation is expected to exacerbate the variability…
Electricity market mechanisms designed to steer sustainable generation of electricity play an important role for the energy transition intended to mitigate climate change. One of the major problems is to complement volatile renewable energy…
In this paper analytic formulas for electricity derivatives are calculated. To this end, we assume that electricity spot prices follow a 3-regime Markov regime-switching model with independent spikes and drops and periodic transition…
We present the closed-form solution to the problem of hedging price and quantity risks for energy retailers (ER), using financial instruments based on electricity price and weather indexes. Our model considers an ER who is intermediary in a…
We investigate the profitability and risk of energy storage arbitrage in electricity markets under price uncertainty, exploring both robust and chance-constrained optimization approaches. We analyze various uncertainty representations,…
Recently, the volatility associated with marginal prices has increased due to large scale integration of renewable generation. Price volatility is undesirable from a consumer perspective. To address this issue, we present a framework for…
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…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
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…
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…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
The paper proposes a framework for modeling and analysis of the dynamics of supply, demand, and clearing prices in power system with real-time retail pricing and information asymmetry. Real-time retail pricing is characterized by passing on…