Spot contract

About: Spot contract is a research topic. Over the lifetime, 3437 publications have been published within this topic receiving 91599 citations.

Deregulating the generation of electricity through the creation of spot markets for bulk power

Abstract: Deregulation of the electric utility system is complex because of the decisions that must be coordinated. The authors propose a way to solve these coordination problems and lead to an efficient, deregulated power system, but do not advocate or oppose its implementation without further study. Their proposal consists of a single regulated company that controls transmission and distribution, many independent generating companies, and consumers who buy at the current spot price. They offer their results as a model for evaluating other proposals to restructure electric utilities. They emphasize that any proposal for change should specify who will make decisions and to what incentives the decision makers will be asked to respond. The proposal can then be evaluated by comparing the decisions likely to be made under the new structure with those made under existing industry structures. 13 references, 2 figures, 4 tables.

Rationality in Precious Metals Forward Markets: Evidence of Behavioural Deviations in the Gold Markets

Abstract: We offer the first examination of whether the gold forward rate is an unbiased predictor of the future gold spot rate. We find strong evidence that it is not, particularly at longer maturities. Building on Aggarwal and Zong’s (2008) approach to allow for investor risk aversion, we then examine if these deviations from rationality can be explained by behavioural factors such as market optimism and over-reaction to news. We find that forecast errors in the gold market generally suffer from overreaction to observed spot price changes but underreact to outflows of gold from Exchange Traded Funds. Further, the forward premium is found to be a consistently optimistic estimate over the full sample. Finally, while the market mood is shown to vary greatly over time, swinging from pessimism in the 1990’s to optimism after 2000, the forecast revision overreaction is found to be consistently stable over the full sample. These are significant, important, and consistent indications of seemingly non-rational behavioural effects in the gold forward market.

Gambling Preferences, Options Markets, and Volatility

Abstract: This study examines whether the gambling behavior of investors affects volume and volatility in financial markets. Focusing on the options market, we find that the ratio of call option volume relative to total option volume is greatest for stocks with return distributions that resemble lotteries. Consistent with the theoretical predictions of Stein (1987), we demonstrate that gambling-motivated trading in the options market influences future spot price volatility. These results not only identify a link between lottery preferences in the stock market and the options market, but they also suggest that lottery preferences can lead to destabilized stock prices.

Strategic Capacity Withholding Through Failures in the German-Austrian Electricity Market

Abstract: In electricity day-ahead markets organized as uniform price auction, a small reduction in supply in times of high demand can cause substantial increases in price. We use a unique data set of failures of generation capacity in the German-Austrian electricity market to investigate the relationship between electricity spot prices and generation failures. Differentiating between strategic and non-strategic failures, we find a positive impact of prices on non-usable marginal generation capacity for strategic failures only. Our empirical analysis therefore provides evidence for the existence of strategic capacity withholding through failures suggesting further monitoring efforts by public authorities to effectively reduce the likelihood of such abuses of a dominant position.