Risk Premiums in Interconnected Australian Electricity Futures Markets PDF Download
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Author: Rangga Handika
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
We provide an empirical analysis of the relationship between spot and futures prices in interconnected regional Australian electricity markets. Examining ex-post risk premiums in futures markets, we find positive and significant risk premiums for several of the considered regions. Therefore, electricity futures prices cannot be considered as an unbiased estimator of the average realized spot price during the delivery period. Market participants are willing to pay a significant additional compensation to get rid of the exposure to price shocks and spikes in the spot market. We further demonstrate seasonal effects in the observed premiums as well as strong and positive correlations between the observed risk premiums across the considered markets. Overall, the observed premiums indicate risk aversion of market participants, in the Queensland and Victoria electricity market. We also relate realized premiums to variables such as spot price levels, volatility, skewness and kurtosis prior to the delivery period. Due to the high correlation of the observed premiums across the regions, we apply a seemingly unrelated regression (SUR) approach. We find that in particular spot price levels, but also skewness and kurtosis of spot prices contribute significantly to the explanation of realized risk premiums.
Author: Rangga Handika
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
We provide an empirical analysis of the relationship between spot and futures prices in interconnected regional Australian electricity markets. Examining ex-post risk premiums in futures markets, we find positive and significant risk premiums for several of the considered regions. Therefore, electricity futures prices cannot be considered as an unbiased estimator of the average realized spot price during the delivery period. Market participants are willing to pay a significant additional compensation to get rid of the exposure to price shocks and spikes in the spot market. We further demonstrate seasonal effects in the observed premiums as well as strong and positive correlations between the observed risk premiums across the considered markets. Overall, the observed premiums indicate risk aversion of market participants, in the Queensland and Victoria electricity market. We also relate realized premiums to variables such as spot price levels, volatility, skewness and kurtosis prior to the delivery period. Due to the high correlation of the observed premiums across the regions, we apply a seemingly unrelated regression (SUR) approach. We find that in particular spot price levels, but also skewness and kurtosis of spot prices contribute significantly to the explanation of realized risk premiums.
Author: Paweł Maryniak
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
We investigate the impacts of the carbon tax (effective July 2012 to July 2014) on wholesale electricity prices in the Australian National Electricity Market (NEM). Analyzing spot and futures contracts in four major regional markets, we first compute ex-ante forward risk premiums in the pre-tax period, then use them to derive market-implied carbon premiums and pass-through rates in the carbon tax and post-tax periods. We find that carbon premiums and pass-through rates became increasingly higher, once the Clean Energy Bill had been introduced and subsequently passed in 2011. We also find strong evidence for a quick reaction of the extracted carbon premiums to changes in opinion polls for the Australian federal election in 2013 and the decision to repeal the tax. On the other hand, during periods where market participants could be relatively certain that the tax would be eff ective, we find expected carbon pass-through rates between 65% and 140%, which seem to be inversely related to emission intensities.
Author: Kris Jacobs
Publisher:
ISBN:
Category :
Languages : en
Pages : 64
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Book Description
We model the impact of supply and demand on risk premiums in electricity futures, using daily data for 2003-2014. The model provides a satisfactory fit and allows for unspanned economic risk not embedded in the futures price. The spot risk premium and forward bias implied by the model are on average large and negative but highly time-varying. Risk premiums display strong seasonal patterns, are related to the variance and skewness of the electricity spot price, and help predict future returns. The risk premium associated with supply constitutes the largest component of the total risk premium embedded in electricity futures.
Author: Matthäus Pietz
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The mechanism behind price formation in electricity futures markets is still under discussion. Theory suggests that hedging pressure caused by deviating risk preferences is the most promising approach. This paper contributes to this discussion through an empirical investigation of electricity futures for delivery in Germany traded at the European Energy Exchange (EEX). We analyse the futures prices from an ex post perspective and show that there is evidence for significant positive risk premia at the short-end. Furthermore, we find that risk premia show a term structure. Evidence for the existence of seasonality in the risk premia is found as well. When testing for factors influencing the risk premia the results suggest that risk premia are directly related to factors linked to risk considerations. -- Electricity ; Electricity Market ; Forward Market ; Futures Market ; Risk Premia ; Risk Premium ; Realised Risk Premia ; Ex post Risk Premia
Author: Fergus Bevin-McCrimmon
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
Research on electricity futures markets has to date not explored the role that market liquidity may play in determining risk premia. Further, no detailed empirical examination of both liquidity and risk premia in the New Zealand electricity futures market are discernible. Using data from October 2009 to December 2015, we address these gaps in the literature. We find that liquidity has been gradually increasing and that a policy intervention to impose a maximum bid-offer spread was associated with liquidity-enhancing structural breaks, but this was evident only in the nearest-to-maturity futures contracts. Further, we develop models to explain risk premia that include a range of risk factors which we categorise as either statistical, physical market, production cost, investor behaviour or liquidity variables. From this analysis, we document significant time-varying premia which are driven by potentially inefficient behaviour. Finally, we find that liquidity risk does affect risk premia, but generally only in the case of longer-dated futures.
Author: Julio J. Lucia
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
Author: Ghada Gomaa A. Mohamed
Publisher: Dr. Ghada Mohamed
ISBN:
Category : Antiques & Collectibles
Languages : en
Pages : 143
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Book Description
The 4th Annual Conference of Economic Forum of Entrepreneurship & International Business Organized by Dr. Ghada Gomaa A. Mohamed Conference venue: London University Institute in Paris, Paris, France Conference proceeding: Library & Archive Canada Conference date: January 31st, 2014 Edited by: Dr. Ghada Mohamed Dr. Morrison Handley-Schachler Dr. Daniel May Dr. Thomas Henschel https://epe.lac-bac.gc.ca/100/201/300/annual_conference_economic/v04.pdf
Author: Christel Merlin Kuate Kamga
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
We propose an approach to estimate and explain the risk premium in carbon and energy futures markets. First, we develop a parsimonious and robust state space model that allows for a time-varying risk premium and apply it to CO2, oil, and gas futures prices. We find that the risk premia are significantly different from zero, strongly time-varying, and that they differ considerably across markets. The CO2 risk premium is mostly positive whereas the oil and natural gas risk premia tend to fluctuate from positive to negative. Next, we extend the existing literature by explaining the risk premia with several macro-financial variables. We show that interest rate, implied volatility, credit risk, and liquidity are important determinants. Moreover, we provide evidence that announcements regarding the EU emissions trading scheme lower the CO2 risk premium and thereby contribute to more transparency.
Author: John W. Kensinger
Publisher: Emerald Group Publishing
ISBN: 1787148408
Category : Business & Economics
Languages : en
Pages : 249
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Book Description
The volume first investigates the impact of macroeconomic variables on equity values in emerging economies as compared with developed economies. Next it affirms the efficiency of the Midcontinent Independent System Operator electricity exchange. Finally it investigates efforts to stimulate emerging nations around the world.
Author: Lin Han
Publisher:
ISBN:
Category : Electricity
Languages : en
Pages : 124
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Book Description
Electricity markets are significantly more volatile than other comparable financial or commodity markets. Extreme price outcomes, typically referred to as price spikes, as well as periods of substantial price volatility and their transmission between interconnected regional markets pose significant risks for market participants.
