Optimal Static Hedging of Energy Price and Volume Risk: Closed-Form Results

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dc.contributor.authorPantoja, Javier
dc.contributor.authorRoncoroni, Andrea
dc.contributor.authorId Brik, Rachid
dc.coverage.spatialMedellín de: Lat: 06 15 00 N degrees minutes Lat: 6.2500 decimal degrees Long: 075 36 00 W degrees minutes Long: -75.6000 decimal degreeseng
dc.creator.emailjpantoja@eafit.edu.cospa
dc.creator.emailroncoroni@gmail.comspa
dc.creator.emailrachid.idbrik@gmail.comspa
dc.date.accessioned2013-03-21T20:32:57Z
dc.date.available2013-03-21T20:32:57Z
dc.date.issued2012-12-15
dc.description.abstractAs an extension of the VaR-constrained hedging, we propose a closed-form solution to the problem of optimizing portfolios, based on price and weather. For electric power companies, price and quantity are volatile, and in hydro-electricity generation quantity can be related to weather conditions. An optimum portfolio is derived from expected utility maximization problem, including weather indices to minimize losses. Due to electric power features, agents in this market are facing price and volume risks, the difficulty to storage efficiently electric power cannot permit to mitigate volumetric risk and alternatively weather instruments can be used in order to hedge unexpected changes in weather; the purpose of weather derivatives is to smooth out the temporal fluctuations in the company’s revenues. For electric power companies price and quantity are volatile, and quantity is correlated to the weather conditions. Moreover, exposures to price and volume risks make necessary the inclusion of the weather pay-off. Thus, we derive the optimal portfolio from the expected utility maximization problem including electric power and weather derivatives whose payoffs will minimize losses.eng
dc.identifier.jelG0
dc.identifier.jelG13
dc.identifier.jelC32
dc.identifier.urihttp://hdl.handle.net/10784/673
dc.language.isoengeng
dc.publisherUniversidad EAFITspa
dc.publisher.departmentEscuela de Economía y Finanzasspa
dc.rights.accessrightsinfo:eu-repo/semantics/openAccesseng
dc.rights.localAcceso abiertospa
dc.subject.keywordStatic Hedgingeng
dc.subject.keywordEnergy Risk Mitigationeng
dc.subject.keywordVolumetric Hedgingeng
dc.subject.keywordIncomplete Marketseng
dc.titleOptimal Static Hedging of Energy Price and Volume Risk: Closed-Form Resultseng
dc.typeworkingPapereng
dc.typeinfo:eu-repo/semantics/workingPapereng
dc.type.hasVersiondrafteng
dc.type.localDocumento de trabajo de investigaciónspa

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