How Big Is the Risk Premium in an Electricity Forward Price? Evidence from the Pacific Northwest

Andrew DeBenedictis, David Miller, Jack Moore, Arne Olson and Chi-Keung Woo

The Electricity Journal, 2011, vol. 24, issue 3, 72-76

Abstract: The numerous benefits of electricity forward trading come at a cost to consumers when a forward price contains a risk premium. An analysis based on the theory of cross hedging suggests that there is a risk premium of about 5 percent in the forward price for delivery at the Mid-Columbia hub of the Pacific Northwest. The existence of a relatively large risk premium suggests that forward contract buyers are more risk-averse than sellers.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1040-6190(11)00060-1
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jelect:v:24:y:2011:i:3:p:72-76

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

The Electricity Journal is currently edited by R. Cohen

More articles in The Electricity Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().