Article ID: | iaor2009404 |
Country: | Germany |
Volume: | 8 |
Issue: | 2 |
Start Page Number: | 163 |
End Page Number: | 171 |
Publication Date: | Jun 2000 |
Journal: | Central European Journal of Operations Research |
Authors: | Keppo Jussi, Rsnen Mika |
Keywords: | pricing, electricity |
We consider efficient pricing and hedging of fixed budget electricity derivatives in competitive electricity markets. The price and the customer's consumption are stochastic processes. With the consumption and price processes we formulate the money amount that the customer spends into electricity consumption. This money amount is the underlying asset of the fixed budget contracts. By using the contracts that take into account both market price and demand uncertainties, the customer can budget his/her electricity consumption beforehand.