This chapter describes forwards and futures for electricity currently traded in Europe and other markets. Due to the non-storability of electricity, spot prices are highly dependent on local supply and demand conditions, business activity, and weather conditions. Seasonality is also very strong during the day (peak versus off-peak hours), during the week, and during cold and hot seasons. As a consequence, liquidity is low and the day-to-day volatility is much higher than in financial markets. Electricity futures and forwards may help generators, consumers, and marketers to manage volatility, but they also introduce risks of their own. The vast literature shows the elusive behavior of the so-called risk premia. We evaluate the ex post performance of monthly base load futures contracts on the Italian market in 2008–2013.We propose and test a linear approximation of the risk premium with respect to the time to maturity

Falbo, P., Felletti, D., Stefani, S. (2016). Electricity futures. In A.G. Malliaris, W.T. Ziemba (a cura di), The World Scientific Handbook of Futures Markets (pp. 545-565). Singapore : World Scientific.

Electricity futures

FELLETTI, DANIELE;STEFANI, SILVANA
2016

Abstract

This chapter describes forwards and futures for electricity currently traded in Europe and other markets. Due to the non-storability of electricity, spot prices are highly dependent on local supply and demand conditions, business activity, and weather conditions. Seasonality is also very strong during the day (peak versus off-peak hours), during the week, and during cold and hot seasons. As a consequence, liquidity is low and the day-to-day volatility is much higher than in financial markets. Electricity futures and forwards may help generators, consumers, and marketers to manage volatility, but they also introduce risks of their own. The vast literature shows the elusive behavior of the so-called risk premia. We evaluate the ex post performance of monthly base load futures contracts on the Italian market in 2008–2013.We propose and test a linear approximation of the risk premium with respect to the time to maturity
Capitolo o saggio
Electricity futures and forwards, spot prices, seasonality, liquidity, risk premia
English
The World Scientific Handbook of Futures Markets
978-981-4566-91-9
Falbo, P., Felletti, D., Stefani, S. (2016). Electricity futures. In A.G. Malliaris, W.T. Ziemba (a cura di), The World Scientific Handbook of Futures Markets (pp. 545-565). Singapore : World Scientific.
Falbo, P; Felletti, D; Stefani, S
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/98952
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