Advanced Trading Strategy in Power Spot Markets (Phase II)

In phase II we focus on asset-backed trading and proprietary trading and work out trading cases, which reveal the difference in the risk exposures. Relying on market efficiency, we apply martingale pricing for teaching how to replicate imbedded options in high volatile markets. This is primarily done in discrete time, which allows for incorporating transaction costs in trading. In addition, we reveal the many opportunities for covering potential losses in proprietary trading with income in asset-backed trading and/or in the marketing of the physical delivery of flexible hydro plants.