Analysis of the Iberian electricity forward market hedging efficiency

Capitán Herráiz, Álvaro and Rodríguez Monroy, Carlos (2013). Analysis of the Iberian electricity forward market hedging efficiency. "International Journal of Financial Engineering and Risk Management", v. 1 (n. 1); pp. 20-34. ISSN 2049-0909. https://doi.org/10.1504/IJFERM.2013.053711.

Description

Title: Analysis of the Iberian electricity forward market hedging efficiency
Author/s:
  • Capitán Herráiz, Álvaro
  • Rodríguez Monroy, Carlos
Item Type: Article
Título de Revista/Publicación: International Journal of Financial Engineering and Risk Management
Date: 2013
Volume: 1
Subjects:
Freetext Keywords: Energy regulation; power futures; regulated auctions; over-the-counter; market supervision; Iberian electricity forward market; Spain; Portugal; hedging efficiency; hedging performance; energy derivatives; liquidity; energy regulators; European regulation.
Faculty: E.T.S.I. Industriales (UPM)
Department: Ingeniería de Organización, Administración de Empresas y Estadística
Creative Commons Licenses: Recognition - No derivative works - Non commercial

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Abstract

An assessment of the hedging performance in the Iberian Forward Electricity Market is performed. Aggregated data from the Portuguese and Spanish clearing houses for energy derivatives are considered. The hedging performance is measured through the ratio of the final open interest of a month derivatives contract divided by its accumulated cleared volume. The base load futures in the Iberian energy derivatives exchange show the lowest ratios due to good liquidity. The peak futures show bigger ratios as their reduced liquidity is produced by auctions fixed by Portuguese regulation. The base load swaps settled in the clearing house located in Spain show initially large values due to low registered volumes, as this clearing house is mainly used for short maturity (daily and weekly swaps). This hedging ratio can be a powerful oversight tool for energy regulators when accessing to all the derivatives transactions as envisaged by European regulation.

More information

Item ID: 28930
DC Identifier: http://oa.upm.es/28930/
OAI Identifier: oai:oa.upm.es:28930
DOI: 10.1504/IJFERM.2013.053711
Official URL: http://www.inderscience.com/info/inarticle.php?artid=53711
Deposited by: Memoria Investigacion
Deposited on: 14 Jan 2015 16:05
Last Modified: 14 Jan 2015 16:05
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