Pricing of Electricity Futures Based on Locational Price Differences : The Case of Finland
Abstract
We find that the pricing of Finnish electricity market futures has been inefficient during the latest 10 years, when the trading volumes of Electricity Price Area Differentials (EPADs) have more than doubled. Even though the calculated futures premium on EPADs is related to some risk measures and the variables capturing the demand and supply conditions in the spot electricity markets, there has been a significant positive excess futures premium in the Finnish market, and financial market participants should have been able to utilize this also in economic terms. This finding is new and relevant for the participants of the Nordic electricity markets also in the future, because both the speculative and hedging-based trading is increasing in the Nordic markets.
Main Authors
Format
Articles
Research article
Published
2018
Series
Subjects
Publication in research information system
Publisher
Elsevier
The permanent address of the publication
https://urn.fi/URN:NBN:fi:jyu-201803141726Käytä tätä linkitykseen.
Review status
Peer reviewed
ISSN
0140-9883
DOI
https://doi.org/10.1016/j.eneco.2018.02.018
Language
English
Published in
Energy Economics
Citation
- Junttila, J., Myllymäki, V., & Raatikainen, J. (2018). Pricing of Electricity Futures Based on Locational Price Differences : The Case of Finland. Energy Economics, 71, 222-237. https://doi.org/10.1016/j.eneco.2018.02.018
License
Copyright© 2018 Elsevier B.V. This is a final draft version of an article whose final and definitive form has been published by Elsevier. Published in this repository with the kind permission of the publisher.