Electricity load pattern hedging with static forward strategies

Managerial Finance

Volumn 31, Issue 6, 2005, Pages 116-137

  Näsäkkälä, Erkka ^a   Keppo, Jussi ^b  

^a AALTO UNIVERSITY   (Finland)

^b UNIVERSITY OF MICHIGAN   (United States)

Author keywords

Derivative instruments; Electricity markets; Hedging

Indexed keywords

EID: 85016199213     PISSN: 03074358     EISSN: 17587743     Source Type: Journal    
DOI: 10.1108/03074350510769721     Document Type: Article

References (39)

1. Audet, N., P. Heiskanen, J. Keppo, and I. Vehviläinen (2003), “Modeling Electricity Forward Curve Dynamics in the Nordic Market”, forthcoming in the Modeling Prices in Competitive Electricity Markets, D. W. Bunn (ed.), Wiley Series in Financial Economics.
2. Björk, T. and C. Landén (2000), “On the Term Structure of Futures and Forward Prices”, SSE/EFI Working Paper Series in Economics and Finance, No 417.
3. Caldentey, R. and M. Haugh (2003), “Optimal Control and Hedging of Operations in the Presence of Financial Markets”, Preprint, Columbia University.
4. Carr, P. and L. Wu (2002), “Static Hedging of Standard Options”, Preprint, New York University.
5. Caldentey, R. and M. Haugh (2003), “Optimal Control and Hedging of Operations in the Presence of Financial Markets”, Preprint, Columbia University.
6. Clewlow, L. and C. Strickland (1999), “Valuing Energy Options in a One Factor Model Fitted to Forward Prices”, Quantitative Finance Research Group, Working paper, University of Technology, Sydney, Australia.
7. Cuoco, D. (1997), “Optimal Consumption and Equilibrium Prices with Portfolio Constrains and Stochastic Income”, Journal of Economic Theory 72, pp.33-73.
8. Cvitanic, J., H. Pham, and N. Touzi (1999), “Super-Replication in Stochastic Volatility Models with Portfolio Constraints”, Journal of Applied Probability 36, pp.523-545.
9. Cvitanic, J., W. Schachermayer, and H. Wang (1997), “Utility Maximization in Incomplete Markets with Random Endowment”, Finance and Stochastics 5, V259-272.
10. Duffie, D. (2001), Dynamic Asset Pricing Theory, 3rd edition, Princeton University Press.
11. Duffie, D. and H.R. Richardson (1991), Mean-Variance Hedging in Continuous Time. Annals of Applied Probability 1, pp.1-15.
12. Ederington, L. H. (1979), “The Hedging Performance of the New Futures Market”, Journal of Finance 34, pp.157-70.
13. Fletcher, R. (1987), Practical Methods of Optimization, Wiley.
14. Fleten, S.-E., S.W. Wallace, and W.T. Ziemba (1997), “Portfolio Management in a Deregulated Hydropower Based Electricity Market, in Hydropower '97", E. Broch, D.K. Lysne, N. Flatbo, E. Helland-Hansen (Eds.), A.A. Balkema, Rotterdam.
15. Fleten, S.-E. and S.W. Wallace (1998), “Power Scheduling with Forward Contracts, in Proceedings of the Nordic MPS”.
16. Föllmer, H. and D. Sondermann (1986), “Hedging of Non-Redundant Contingent Claims, in the Contributions to Mathematical Economics”, W. Hildenbrand and A. Mas-Colell (Eds.) Amsterdam, North Holland, pp.205-223.
17. Franicele, C. T. (1980), “The Hedging Performance of the New Futures Market: Comment”, Journal of Finance, 35, pp.1273-79.
18. Gjelsvik, A., T. Røtting, and J. Røynstrand (1992), “Long-term scheduling of hydro-thermal power systems”, Hydropower, pp.539-546.
19. Heath, D., R. Jarrow, and A. Morton (1992), Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claim Valuation, Econometrica, 60, pp.77-105.
20. Honda, Y. (1983), “Production Uncertainty and the Input Decision of the Competitive Firm Facing the Futures Market”, Economics Letters 11, pp.87-92.
21. Hull, J.C. (1997), Options, Futures and Other Derivative Securities., fourth edition 4th ed., Englewood Cliffs, NJ, USA: Prentice-Hall Inc.
22. Karatzas, I., J. Lehoczky, S. Shreve, and G.-L. Xu (1991), “Martingale and Duality Methods for Utility Maximization in an Incomplete Market”, Siam Journal of Control and Optimization, 29, pp.702-730.
23. Keppo, J. (2002), Optimality with Hydropower System”, IEEE Transactions on Power Systems, 3, pp.583-589.
24. Koekebakker, S., F. Ollmar (2001), “Forward Curve Dynamics in the Nordic Electricity Market”, Preprint, Norwegian School of Economics and Business Administration.
25. Lien, D. and Y.K. Tse (2002), “Some Recent Developments in Futures Hedging”, Journal ofEconomic Surveys 16.
26. Lim, A.E.B. (2002), Quadratic Hedging and Mean-Variance Portfolio Selection in an Incomplete Market, forthcoming in Mathematics of Operations Research.
27. Lucas, R. E. (1978), “Asset Prices in an Exchange Economy”. Econometrica, 46, pp.1429-1445.
28. Miltersen, K.R. and E.S. Schwartz (1998), “Pricing of Options on Commodity Futures with Stochastic Term Structures of Convenience Yield and Interest Rates”, Journal of Financial and Quantitative Analysis 33, pp.33-59.
29. Moschini, G. and H. Lapan (1992), “Hedging Price Risk with Futures and Options for the Competitive Firm with Production Flexibility”, International Economic Review, 33, pp.607-618.
30. Naik, V. and M. Lee (1990), “General Equilibrium Pricing of Options on the Market Portfolio with Discontinuous Returns”. Review ofFinancial Studies 3, pp.493-521.
31. Paroush, J. and A. Wolf (1986), “Production and Hedging Decisions with Futures and Forward Markets”, Economics Letters 21, pp.139-143.
32. Pereira, M. (1989), “Optimal stochastic operations scheduling of large hydroelectric systems”, International Journal of Electrical Power & Energy Systems, 11, pp.161-169.
33. Pilipović, D. (1998), Energy Risk: Valuing and Managing Energy Derivatives, McGraw-Hill.
34. Räsänen M., Ruusunen J. and Hämäläinen R.P. (1995), “Customer level analysis of dynamic pricing experiments using consumption-pattern models”, Energy, 20, pp.897-906.
35. Räsänen M., Ruusunen J. and Hämäläinen R.P.(1997), “Optimal tariff design under consumer self-selection”, Energy Economics, 19, pp. 151-167.
36. Schweizer, M. (1992), “Mean-variance Hedging for General Claims”, Annals of Applied Probability, 2, pp.171-179.
37. Schweizer, M. (2001), A guided Tour through Quadratic Hedging Approaches, in Option Pricing, Interest Rates and Risk Management, E. Jouini et al. (Eds.) Cambridge, U.K., Cambridge University Press, pp.538-574.
38. Stulz, R. M. (1984), “Optimal Hedging Policies”, Journal of Financial and Quantitative Analysis, 19, pp.127-40.
39. Vehviläinen, I. and J. Keppo (2003), Managing Electricity Market Price Risk”, European Journal of Operational Research, 145, pp.136-147.