Risk Management in the Electricity Market

Xuanhan Zhang ()
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Xuanhan Zhang: Leeds University, Electronic and Electrical Engineering

A chapter in Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022), 2022, pp 1697-1702 from Springer

Abstract: Abstract As electricity products have the properties of significant volatility, no easy storage, and high elasticity of demand, the spot prices can be highly volatile over a certain period. To reduce the possibility of such uncertainty, electricity products need better risk management. One effective method is using financial instruments. In this paper, we will mainly discuss risk management by using derivatives and the adaptability of futures and forwards in the electricity market. For most investors, they prefer to hedge with a portfolio of derivatives. We will also explain Modern Portfolio Theory (MPT) to help readers understand how to use mathematical models to trade off risk and return.

Keywords: Electricity market; Risk; management; Derivatives; Adaptability (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-036-7_254

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DOI: 10.2991/978-94-6463-036-7_254

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