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© Rainer Sturm / PIXELIO
© Eva Kaliwoda / PIXELIO
© Rosel Eckstein / PIXELIO
© Uschi Dreiucker / PIXELIO
© Uschi Dreiucker / PIXELIO
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© Joujou / PIXELIO
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© Rainer Sturm / PIXELIO

Implementation VEB (Energy Lost in Transition)

The principle of replication is widely used for valuating and hedging financial contracts, in particular derivatives. In the special situation of energy lost in the transmission grid, this principle is not appropriate and might lead to unrealistically high prices, as complete hedging is not possible. The problem of pricing non-standard power contracts in incomplete markets can be approached with the concept of acceptability pricing. Therefore, the project considers alternative valuation strategies: acceptability pricing weakens the requirement of almost sure replication and indifference pricing accounts for the opportunity costs of covering the producing for a considered contract. Acceptability pricing is based on finding a procurement strategy with acceptable risk that is not dominated by a better strategy.

Key Information

Research Partners: University of St. Gallen
Keywords: Electricity Markets, Energy Trading
Start date: 05.01.2015
End date: 24.06.2016
Status: completed

 
Competence Center for Research in Energy, Society and Transition
In case of questions, please contact the Management Office
In case of questions, please contact the Management Office.
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