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Spot contract

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


Papers
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Journal ArticleDOI
TL;DR: In this paper, the authors propose a model where wholesale electricity prices are explained by two state variables: demand and capacity, and derive analytical expressions to price forward contracts and to calculate the forward premium.
Abstract: We propose a model where wholesale electricity prices are explained by two state variables: demand and capacity. We derive analytical expressions to price forward contracts and to calculate the forward premium. We apply our model to the PJM, England and Wales, and Nord Pool markets. Our empirical findings indicate that volatility of demand is seasonal and that the market price of demand risk is also seasonal and positive, both of which exert an upward (seasonal) pressure on the price of forward contracts. We assume that both volatility of capacity and the market price of capacity risk are constant and find that, depending on the market and period under study, it could either exert an upward or downward pressure on forward prices. In all markets we find that the forward premium exhibits a seasonal pattern. During the months of high volatility of demand, forward contracts trade at a premium. During months of low volatility of demand, forwards can either trade at a relatively small premium or, even in some cases, at a discount, i.e. they exhibit a negative forward premium.

127 citations

Book ChapterDOI
01 Jan 2014
TL;DR: In this article, a survey of the major idiosyncrasies of commodity markets and the methods which have been proposed to handle them in spot and forward price models is presented, focusing on the most idiosyncratic of all: electricity markets.
Abstract: The goal of this survey is to review the major idiosyncrasies of the commodity markets and the methods which have been proposed to handle them in spot and forward price models. We devote special attention to the most idiosyncratic of all: electricity markets. Following a discussion of traded instruments, market features, historical perspectives, recent developments and various modelling approaches, we focus on the important role of other energy prices and fundamental factors in setting the power price. In doing so, we present a detailed analysis of the structural approach for electricity, arguing for its merits over traditional reduced-form models. Building on several recent articles, we advocate a broad and flexible structural framework for spot prices, incorporating demand, capacity and fuel prices in several ways, while calculating closed-form forward prices throughout.

127 citations

Journal ArticleDOI
TL;DR: This paper tested the martingale hypothesis for daily and weekly rates of change of futures prices for five currencies and found some evidence against the null hypothesis for each currency with daily data, but only for one currency.

127 citations

Journal ArticleDOI
TL;DR: In this article, the authors argue that if the current spot price equals the true expectation of the future spot price, the futures market cannot provide a better forecast than the realized spot price.
Abstract: Futures markets are often described as having two important social functions. First, they facilitate the transfer of commodity price risk, and, second, they provide forecasts of commodity prices. The evidence that futures markets transfer price risk is irrefutable. However, there is some debate about the markets' forecasting ability. In particular, forecasts based on the current spot price are often as good as those based on the futures price. Some economists cite a failure to detect superior forecast power in futures prices as evidence of market inefficiency (see, e.g., Leuthold 1974; and Martin and Garcia 1981). There are at least two other explanations. First, there may be nothing for the futures market to forecast. If the current spot price equals the true expectation of the future spot price, the futures market cannot provide a better forecast. Second, a superior futures market forecast may be obscured by the unexpected component of the realized spot price. The true expectation of the future spot price is unobservable; one must approximate this expectation with the actual future spot price.

126 citations

Book ChapterDOI
TL;DR: In this paper, the AC-model is used to estimate real and reactive power spot prices in the presence of voltage constraints, and the full AC-Model is required to determine both real-and reactive-power spot prices.
Abstract: Differences in locational spot prices in an electric network provide the natural measure of the price for transmission. The ubiquitous problem of loop flow requires different economic intuition for interpreting the implications of spot pricing. The DC-Load model is the usual approximation for estimating spot prices, although it ignores reactive power effects. This approximation is best when thermal constraints create congestion in the network. In the presence of voltage constraints, the DC-Load model is insufficient, and the full AC-Model is required to determine both real and reactive power spot prices.

126 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
20241
202376
2022205
2021111
2020115
2019106