Short-term Hedging for an Electricity Retailer

Debbie Dupuis, Geneviève Gauthier, and Fréderic Godin

The Energy Journal, 2016, vol. Volume 37, issue Number 2

Abstract: A dynamic global hedging procedure making use of futures contracts is developed for a retailer of the electricity market facing price, load and basis risk. Statistical models reproducing stylized facts are developed for the electricity load, the day-ahead spot price and futures prices in the Nord Pool market. These models serve as input to the hedging algorithm, which also accounts for transaction fees. Back-tests with market data from 2007 to 2012 show that the global hedging procedure provides considerable risk reduction when compared to hedging benchmarks found in the literature.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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