Abstract

We investigate the presence of significant electricity forward risk premia, using data from three major continental European energy markets - German, Dutch and French. We introduce the risk premium in the framework of a standard electricity spot/forward unobserved factor model, and derive the implied forward price behaviour. We then assess the term-structure and time-evolution of the risk premia for each of the markets.

Recommended Citation

Pavel Diko, Steve Lawford, and Valerie Limpens (2006) "Risk Premia in Electricity Forward Prices", Studies in Nonlinear Dynamics & Econometrics: Vol. 10: No. 3, Article 7.
http://www.bepress.com/snde/vol10/iss3/art7

Related Files

diko_datacode.zip (672 kB)
Data and code