Co-Simulation of Risk Factors in Power Markets

18 Pages Posted: 6 Jun 2015

See all articles by Jialin Zhao

Jialin Zhao

Illinois Institute of Technology - Stuart School of Business, IIT

Sang Baum Kang

Illinois Institute of Technology - Stuart School of Business

Date Written: June 4, 2015

Abstract

This article proposes a simple but realistic model to co-simulate the time series of three risk factors: temperature, electricity load, and prices. In addition, the authors provide load serving entities with a quantitative analysis of an electricity price-volume joint risk; illustrate a hedging strategy using weather and electricity price derivatives; and price a tailor-made temperature contingent contract.

Keywords: Co-simulation, temperature, electricity load, electricity prices

Suggested Citation

Zhao, Jialin and Kang, Sang Baum, Co-Simulation of Risk Factors in Power Markets (June 4, 2015). Available at SSRN: https://ssrn.com/abstract=2614664 or http://dx.doi.org/10.2139/ssrn.2614664

Jialin Zhao (Contact Author)

Illinois Institute of Technology - Stuart School of Business, IIT ( email )

10 West 35th Street, 18th Floor
Chicago, IL 60616
United States

Sang Baum Kang

Illinois Institute of Technology - Stuart School of Business ( email )

565 W Adams St
Room 454
Chicago, IL
United States
312-906-6577 (Phone)

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