Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/75103
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- Title
- Quantifying risk in the electricity business : a RAROC-based approach
- Related
- Energy economics, Vol. 29, Issue 5, p.1033-1049
- DOI
- 10.1016/j.eneco.2006.08.006
- Publisher
- Elsevier
- Date
- 2007
- FoR/RFCD Code(s)
-
140200 Applied Economics
150200 Banking, Finance and Investment
- Author/Creator
- Prokopczuk, Marcel
- Author/Creator
- Rachev, Svetlozar T
- Author/Creator
- Schindlmayr, Gero
- Author/Creator
- Trück, Stefan
- Description
- The liberalization of electricity markets has forced energy producing companies and traders to calculate costs closer to the profit frontier. Thus, an efficient risk management and risk controlling are needed to ensure the financial survival even during bad times. Using the RAROC methodology we provide a new framework to quantify risks related to wholesale electricity contracts, also called full load contracts. We do not only consider risk of market price fluctuations but also correlation effects between the spot market price and the load curve of a customer. We further conduct an empirical study on whole sale contracts for industry customers and public utility companies of a German energy provider. Our findings support the adequateness of the approach and point out the importance of considering also price–volume correlation effects for electricity whole sale contracts.
- Description
- 17 page(s)
- Subject Keyword
- 140200 Applied Economics
- Subject Keyword
- 150200 Banking, Finance and Investment
- Subject Keyword
- power markets
- Subject Keyword
- spot market prices
- Subject Keyword
- load contracts
- Subject Keyword
- risk management
- Subject Keyword
- RAROC
- Resource Type
- journal article
- Organisation
- Macquarie University. Dept. of Economics
- Identifier
- http://hdl.handle.net/1959.14/75103
- Identifier
- ISSN:0140-9883
- Identifier
- mq-rm-2007008339
- Language
- eng
- Reviewed
