Article ID: | iaor20042677 |
Country: | Netherlands |
Volume: | 145 |
Issue: | 1 |
Start Page Number: | 136 |
End Page Number: | 147 |
Publication Date: | Feb 2003 |
Journal: | European Journal of Operational Research |
Authors: | Keppo Jussi, Vehvilinen Iivo |
Keywords: | risk, simulation: applications, stochastic processes |
This paper introduces an application of financial risk management methods to the deregulated electricity markets. A framework for the Monte Carlo performance simulation of a power portfolio is presented. The optimal portfolio selection problem is addressed and a numerical method is implemented. Numerical results of simulation and optimization are presented in the Nordic electricity market. The results suggest that the risk management methods of the paper can be applied to the everyday electricity market practice.