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The Relationship between spot and futures prices : an empirical snalysis of Australian electricity markets

Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/196070

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Title: The Relationship between spot and futures prices : an empirical snalysis of Australian electricity markets
Related: IAEE Asian Conference (3rd : 2012) (20 - 22 February 2012 : Kyoto, Japan)
Related: Papers from the 3rd IAEE Asian Conference, p.1-12
Related: http://eneken.ieej.or.jp/3rd_IAEE_Asia/pdf/paper/097p.pdf
Publisher: International Association for Energy Economics
Date: 2012
Author/Creator: Handika, Rangga
Author/Creator: Trück, Stefan
Description: This paper presents an empirical analysis of the relationship between spot and futures prices in regional Australian electricity markets. Based on economic theory, we expect that the forward prices will be related to the expected spot price according to fundamental market expectations. Examining ex-post futures premiums, we find that Australian electricity markets exhibit positive and significant risk premiums for several of the considered regions such that futures prices cannot be considered as an unbiased estimator of the future spot price. We also show that there is strong and positive correlation between the observed futures premiums across different regional markets in Australia. The price formation in the considered markets seems to be influenced by historical spot price behaviour. Further investigating the issue, we find that for some of the markets the bias can at least partially be explained by the level, standard deviation, skewness and kurtosis of spot prices in the month prior to delivery.
Description: 12 page(s)
Subject Keyword: electricity markets
Subject Keyword: spot and futures prices
Subject Keyword: risk premium
Subject Keyword: regional markets
Resource Type: conference paper
Organisation: Macquarie University. Dept. of Applied Finance and Actuarial Studies

Identifier: http://hdl.handle.net/1959.14/196070
Identifier: mq_res-20121115-121914
Language: eng

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