An Empirical Study of the Information Premium on Electricity Markets

48 Pages Posted: 21 Jul 2012

See all articles by Richard Biegler-König

Richard Biegler-König

Evonik Steag GmbH; University of Duisburg-Essen - Department of Economics and Business Administration

Fred Espen Benth

University of Oslo

Ruediger Kiesel

University of Duisburg-Essen - Faculty of Economic Science

Date Written: February 23, 2012

Abstract

Due to the non-storability of electricity and the resulting lack of arbitrage-based arguments to price electricity forward contracts, these exhibit a significant time-varying risk premium. Using EEX data during the introduction of Emission certificates and the German "Atom Moratorium" we show that a significant part of the risk premium in electricity forwards is due to different information sets in spot and forward markets. In order to show the existence of the resulting information premium and to analyse its size we design an empirical method based on techniques relating to enlargement of filtrations and the structure of Hilbert spaces.

Keywords: Electricity markets, risk premium, information premium,spot-forward relationship, enlargement of filtrations, Gaussian and non-Gaussian Ornstein-Uhlenbeck processes, Hilbert space representation

JEL Classification: C19, G13, G14, Q40

Suggested Citation

Biegler-König, Richard and Benth, Fred Espen and Kiesel, Ruediger, An Empirical Study of the Information Premium on Electricity Markets (February 23, 2012). Available at SSRN: https://ssrn.com/abstract=2114196 or http://dx.doi.org/10.2139/ssrn.2114196

Richard Biegler-König (Contact Author)

Evonik Steag GmbH ( email )

Rellinghauser Straße 1-11
Essen, 45128
Germany

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

Fred Espen Benth

University of Oslo ( email )

Center of Mathematics for Applications
Oslo, N-0317
Norway

Ruediger Kiesel

University of Duisburg-Essen - Faculty of Economic Science ( email )

Essen, 45117
Germany

HOME PAGE: http://www.lef.wiwi.uni-due.de/

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