An empirical study of the information premium on electricity markets

Fred Espen Benth, Richard Biegler-König and Rüdiger Kiesel

Energy Economics, 2013, vol. 36, issue C, 55-77

Abstract: Due to the non-storability of electricity and the resulting lack of arbitrage-based arguments to price electricity forward contracts, a significant time-varying risk premium is exhibited. Using EEX data during the introduction of emission certificates and the German “Atom Moratorium” we show that a significant part of the risk premium in electricity forwards is due to different information sets in spot and forward markets. In order to show the existence of the resulting information premium and to analyse its size we design an empirical method based on techniques relating to enlargement of filtrations and the structure of Hilbert spaces.

Keywords: Electricity markets; Risk premium; Information premium; Spot–forward relationship; Enlargement of filtrations; Gaussian and non-Gaussian Ornstein–Uhlenbeck processes; Hilbert space representation (search for similar items in EconPapers)
JEL-codes: C19 G13 G14 Q40 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:36:y:2013:i:c:p:55-77

DOI: 10.1016/j.eneco.2012.12.001

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