Optimal Static Hedging of Volumetric Risk in a Competitive Wholesale Electricity Market

Published Online:https://doi.org/10.1287/deca.1090.0167

References

  • Ahn D.-H., Boudoukh J., Richardson M., Whitelaw R. F. Optimal risk management using options. J. Finance (1999) 54(1):359–375CrossrefGoogle Scholar
  • Audet N., Heiskanen P., Keppo J., Vehviläinen I., Bunn D. W. Modeling electricity forward curve dynamics in the Nordic market. Modelling Prices in Competitive Electricity Markets (2004) (John Wiley & Sons, New York) 251–266Wiley Series in Financial EconomicsChap. 12Google Scholar
  • Brown G. W., Toft K. B. How firms should hedge. Rev. Financial Stud. (2002) 15(4):1283–1324CrossrefGoogle Scholar
  • California Public Utility Commission Order instituting rulemaking to establish policies and cost recovery mechanisms for generation procurement and renewable resource development interim opinion. (2004a) . Decision 04-01-050, California Public Utility Commission, San FranciscoGoogle Scholar
  • California Public Utility Commission Resource adequacy proceeding interim opinion regarding resource adequacy. (2004b) . Decision 04-10-035, California Public Utility Commission, San FranciscoGoogle Scholar
  • Carr P., Madan D. Optimal positioning in derivative securities. Quant. Finance (2001) 1(1):19–37CrossrefGoogle Scholar
  • Chao H.-P., Wilson R. Resource adequacy and market power mitigation via option contracts. Proc. 9th Annual POWER Res. Conf. (2004) University of California at Berkeley, BerkeleyGoogle Scholar
  • Danthine J.-P. Information, futures prices, and stabilizing speculation. J. Econom. Theory (1978) 17(1):79–98CrossrefGoogle Scholar
  • Duffie D., Zariphopoulou T. Optimal investment with undiversifiable income risk. Math. Finance (1993) 3(2):135–148CrossrefGoogle Scholar
  • Eydeland A., Wolyniec K.Energy and Power Risk Management: New Developments in Modeling, Pricing, and Hedging (2003) (John Wiley & Sons, New York) Google Scholar
  • Feder G., Just R. E., Schmitz A. Futures markets and the theory of the firm under price uncertainty. Quart. J. Econom. (1980) 94(2):317–328CrossrefGoogle Scholar
  • Fleten S. E., Wallace S. W., Ziemba W. T. Hedging electricity portfolios via stochastic programming. (1999) . Working paper, Norwegian University of Science and Technology, Trodenheim, NorwayGoogle Scholar
  • Gussow J. Power systems operations and trading in competitive energy markets. (2001) . Ph.D. thesis, University of St. Gallen (HSG), St. Gallen, SwitzerlandGoogle Scholar
  • He H., Pages H. Labor income, borrowing constraints, and equilibrium asset prices. Econom. Theory (1993) 3(4):663–696CrossrefGoogle Scholar
  • Herzog F. Optimal dynamic control of hydro-electric power production. (2002) . Master's thesis, Swiss Federal Institute of Technology, ZurichGoogle Scholar
  • Holthausen D. M. Hedging and the competitive firm under price uncertainty. Amer. Econom. Rev. (1979) 69(5):989–995Google Scholar
  • Kimball M. S. Precautionary saving in the small and in the large. Econometrica (1990) 58(1):53–73CrossrefGoogle Scholar
  • Kimball M. S. Standard risk aversion. Econometrica (1993) 61(3):589–611CrossrefGoogle Scholar
  • Kleindorfer P., Li L. Multi-period VaR-constrained portfolio optimization with applications to the electric power sector. Energy J. (2005) 26(1):1–26CrossrefGoogle Scholar
  • Koekebakker S., Ollmar F. Forward curve dynamics in the Nordic electricity market. Managerial Finance (2005) 31(6):73–94CrossrefGoogle Scholar
  • Lee Y., Oren S. An equilibrium pricing model for weather derivatives in a multi-commodity setting. Energy Econom. (2009) 31(5):702–713CrossrefGoogle Scholar
  • Loxley C., Salant D. Default service auctions. J. Regulatory Econom. (2004) 26(2):201–229CrossrefGoogle Scholar
  • Lucia J. J., Torró H. Short-term electricity futures prices: Evidence on the time-varying risk premium. (2008) . Working paper, Department of Financial Economics, University of Valencia, Valencia, SpainGoogle Scholar
  • McKinnon R. I. Future markets, buffer stocks, and income stability for primary producers. J. Political Econom. (1967) 75(6):844–861CrossrefGoogle Scholar
  • Morone A. Comparison of mean-variance theory and expected-utility theory through a laboratory experiment. Econom. Bull. (2008) 3:1–7Google Scholar
  • Moschini G., Lapan H. The hedging role of options and futures under joint price, basis, and production risk. Internat. Econom. Rev. (1995) 36(4):1025–1049CrossrefGoogle Scholar
  • Näsäkkälä E., Keppo J. Electricity load pattern hedging with static forward strategies. Managerial Finance (2005) 31(6):115–136CrossrefGoogle Scholar
  • Oren S. Generation adequacy via call option obligations: Safe passage to the promised land. Electricity J. (2005) 18(9):28–42CrossrefGoogle Scholar
  • Oum Y., Oren S. S. VaR constrained hedging of fixed price load-following obligations in competitive electricity markets. J. Decision Risk Anal. (2009) 1(1):43–56Google Scholar
  • Oum Y., Oren S., Deng S. Hedging quantity risks with standard power options in a competitive wholesale electricity market. Naval Res. Logist. (2006) 53(7):697–712CrossrefGoogle Scholar
  • Unger G. Hedging strategy and electricity contract engineering. (2002) . Ph.D. thesis, Swiss Federal Institute of Technology, ZurichGoogle Scholar
  • Vehviläinen I., Keppo J. Managing electricity market price risk. Eur. J. Oper. Res. (2003) 145(1):136–147CrossrefGoogle Scholar
  • Wagner M., Skantze P., Ilic M. Hedging optimization algorithms for deregulated electricity markets. Proc. 12th Conf. Intelligent Systems Appl. Power Systems (2003) Lemnos, GreeceGoogle Scholar
  • Willems B. Virtual divestitures, will they make a difference? Proc. 11th Annual POWER Res. Conf. (2006) University of California at Berkeley, BerkeleyGoogle Scholar
  • Wong K. Currency hedging with options and futures. Eur. Econom. Rev. (2003) 47(5):833–839CrossrefGoogle Scholar
  • Woo C. K., Karimov R., Horowitz I. Managing electricity procurement cost and risk by a local distribution company. Energy Policy (2004) 32(5):635–645CrossrefGoogle Scholar
  • Xu M. Risk measure pricing and hedging in incomplete markets. Ann. Finance (2006) 2(1):51–71CrossrefGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.