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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.
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TL;DR: In this paper, the problem of finding the optimal portfolio based on known electricity generation total costs, bilateral contract prices, employed Turkish historical balanced market hourly system marginal and day-ahead hourly market prices between of 2006 and 2011.
Abstract: Electricity constitutes the input into many products that produced by industry and used by people. Hence, it can be considered as a product or service that has vital importance in human life and economy. Since it has such special properties of instantaneous production and consumption obligation and unfeasible storage, electricity market is not like other markets. In a competitive electricity market, generation company faces price risks and delivery risks. So that risk management is an important part of a generation company and can deeply effect companies’ profitability. This paper focuses on electricity generation asset allocation between bilateral contracts, such as forward contracts, and daily spot market, considering constraints of generating units and spot price risks. The problem is to find the optimal portfolio based on known electricity generation total costs, bilateral contract prices, it employed Turkish historical balanced market hourly system marginal and day-ahead hourly market prices between of 2006 and 2011. There are limited studies about portfolio optimization in electricity markets in literature and this paper should be considered frontier study taking spot market's hourly prices separately as risky assets. Markowitz mean-variance optimization which is claimed to be the beginning of modern portfolio theory in financial sector is used to demonstrate this approach. Mean-variance optimization has been successfully applied to all cases that modeled for electricity market. Some suggestions for future work are also listed in this paper.
66 citations
TL;DR: In this article, the authors examined empirically the relationship between electricity spot and futures prices, by analysing a decade of data for a set of short term-to-maturity futures contracts traded in the Nordic Power Exchange.
66 citations
TL;DR: In this article, a battery of models based on Fourier or wavelet decomposition combined with linear or exponential decay was used to forecast the long-term seasonal components of electricity spot prices.
66 citations
TL;DR: It is demonstrated that though use of TCSC makes the system more efficient and augments competition in the market, it is not easy to establish general relationships between the levels of compensation and various market quantities.
65 citations
TL;DR: In this paper, the real option value (ROV) method is used to evaluate a mine's in situ value and a strategy to manage mining activities, and the value of flexibility peaks when mining cost equals spot price; the exercising price threshold increases as average cost rises and probabilities of exercising the option are estimated.
Abstract: By determining the optimal price threshold of mining activation, this research aims at estimating a mine’s in situ value by incorporating its real option value (ROV). The traditional discounted cash flow (DCF) method, the standard tool for economic feasibility studies in mineral industry, can be problematic since it fails to address uncertainties and operational flexibilities (Trigeorgis Adv Futures Options Res 4:S1537164, 1990; Schwartz J Financ 3:923–973, 1997; Slade J Environ Econ Manag 41:193–233, 2001; Abdel Sabour and Dimitrakopoulos J Min Sci 47(2):191–201, 2011). DCF normally results in under-evaluation when significant price variability is present in commodity prices such as gold, silver, copper, and recently rare earths. A mining project is more valuable in expected value terms if it is activated following an appropriately chosen price threshold. In this work, the commodity price is modeled using a mean-reverting process, which is more relevant to commodity economics than the generally used Geometric Brownian motion process (Pindyck and Rubinfeld 1991). It is shown that the value of flexibility is significant and peaks when mining cost equals spot price; the exercising price threshold increases as average cost rises and probabilities of exercising the option are estimated. ROV method provides a tractable and realistic scheme to evaluate a mine’s in situ value and a strategy to manage mining activities.
65 citations