Ex ante and ex post risk premiums in electricity futures

M. Angeles Carnero, Stein-Erik Fleten, Ståle Størdal and Sjur Westgaard

Quantitative Finance, 2025, vol. 25, issue 11, 1717-1729

Abstract: This paper examines ex post and ex ante risk premiums on Nordic electricity futures over different time horizons, using commercial-grade forecasts from 2013–2024. It assesses the variation in risk premiums with supply scarcity and with seasons, and analyzes higher moments (skewness and kurtosis) in these contexts. The study finds that ex post premiums usually surpass ex ante premiums, with significantly negative premiums in summer across all contracts. Additionally, risk premiums tend to increase during periods of limited hydropower production opportunities. The analysis highlights the importance of skewness in risk premiums, noting positive skewness during autumn and winter.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:25:y:2025:i:11:p:1717-1729

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DOI: 10.1080/14697688.2025.2551768

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