HEDGING INEFFECTIVENESS AND FORWARD MARKET UNDERDEVELOPMENT IN THE ROMANIAN ELECTRICITY MARKET, 2019–2025

Călin-Andrei Piteș
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Călin-Andrei Piteș: Bucharest University of Economic Studies, Romania

Studii Financiare (Financial Studies), 2026, vol. 30, issue 2, 108-128

Abstract: The Romanian electricity market exhibits substantial spot-price volatility yet operates with an underdeveloped centralised forward market. This paper provides an ex-post empirical assessment of unmet hedging demand and operational deterioration in the OPCOM Centralised Market of Bilateral Non-standardised Contracts (PCCB-NC) over 2019–2025. Using monthly OPCOM data, EEX volume reports, and Eurostat consumption statistics, the analysis combines the Ederington (1979) hedge-effectiveness framework, a cross-market benchmark against standardised regional forward contracts, and a scenario-based estimate of unmet hedging demand. The hedge effectiveness of PCCB-NC deteriorates sharply across sub-periods, with the spot-forward R² collapsing by roughly an order of magnitude between the energy crisis and the post-crisis period, while spot-price volatility remained elevated. Romanian forward-market intensity is found to be one to two orders of magnitude below standardised regional benchmarks, which recovered after the crisis, whereas the Romanian platform did not. The unmet hedging demand on operational short-term forward instruments is estimated in the order of several TWh per year in 2024, well in excess of the volume actually traded, even after adjusting for parallel long-term bilateral coverage. The findings support reassessing Romania’s electricity hedging infrastructure and evaluating standardised, centrally cleared derivatives as a potential market-design response.

Keywords: minimum-variance hedge ratio; spot-forward basis; central clearing; energy crisis; market microstructure (search for similar items in EconPapers)
JEL-codes: G13 G18 L94 Q41 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:vls:finstu:v:30:y:2026:i:2:p:108-128

DOI: 10.65672/fs.2026.2.5

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