Energy Trading and Risk Management: A Practical Approach to by Iris Marie Mack

By Iris Marie Mack

Strength buying and selling and danger administration presents a accomplished evaluate of world strength markets from one of many finest specialists on strength derivatives and quantitative finance. With an approachable writing kind, Iris Mack breaks down the 3 fundamental functions for power derivatives markets – chance administration, hypothesis, and funding Portfolio Diversification – in a fashion that hedge fund investors, specialists, and effort marketplace individuals can practice of their day after day buying and selling actions.

Moving from the basics of strength markets via uncomplicated and complicated derivatives buying and selling, hedging concepts, and industry-specific case reports, Dr. Mack walks readers via strength buying and selling and possibility administration suggestions at an instructive velocity, helping her motives with real-world examples, illustrations, charts, and special definitions of vital and often-misunderstood terms.

From stochastic pricing versions for unique derivatives, to fashionable portfolio idea (MPT), strength portfolio administration (EPM), to case stories dealing particularly with hazard administration demanding situations detailed to wind and hydro-electric energy, the bookguides readers in the course of the complicated global of power buying and selling and probability administration to assist traders, executives, and effort pros make sure profitability and optimum probability mitigation in each industry climate.

Energy buying and selling and threat administration is a brilliant source to assist grapple with the very fascinating yet normally complicated concerns that come up in power buying and selling and danger administration.

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Additional info for Energy Trading and Risk Management: A Practical Approach to Hedging, Trading and Portfolio Diversification (Wiley Finance)

Example text

2005. com/research/forecasting-spot-electricity-prices-timeseries-models. 5) is a log price OrnsteinUhlenbeck stochastic process. In this case, the mean reversion process is used to model the log of the electricity spot price. Hence, a log-spot less than zero still corresponds to a spot price greater than zero. 6) S(t) = exp ln(S0 )e − αt +  µ L − [ − e 1 σ  ∫ 2α     0 This process is often utilized in electricity spot price modeling. However, it is normally tweaked to handle spikes in electricity prices, blackouts, seasonality, geographical regions of the national power grid, and so forth (Clewlow and Strickland 2000).

New York ISO (NYISO). 2013. jsp. Pilipovic, Dragana. 2007. Energy Risk: Valuing and Managing Energy Derivatives, 2nd ed. New York: McGraw-Hill. PJM. 2013. ” PJM Markets and Operation. aspx. Skantze, Petter, and Marija Ilic. 2000. ” Energy Laboratory Report No. MIT-EL 00-005. pdf. , T. Belden, C. Goldman, and S. Pickle. 1998. ” Environmental Energy Technologies Division: Ernest Orlando Lawrence Berkeley National Laboratory, LBNL-41098, UC-1321. pdf. Tractebel Engineering. 2009. ” Katholieke Universiteit Leuven, TREN/C2/84/2007.

8 Energy Trading and Risk Management Electric power markets possess some of the characteristics of more matured commodity and financial securities markets. However there are some unique characteristics of the operation of the wholesale electric spot market that have implications for energy trading. 1 (KPMG 2006; Pilipovic 2007; Weron and Misiorek 2005). 1 Some Unique Characteristics of Electricity Markets Prices Quantifiable exogenous variables that may affect electricity prices: Transmission constraints ■■ Weather-induced demand spikes ■■ Generator bidding patterns ■■ Seasonality of load ■■ Psychological and sociological factors may cause an unexpected buyout of certain contracts, leading to price fluctuations.

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