Statistical Arbitrage and Information Flow in an Electricity Balancing Market

31 Pages Posted: 22 Jan 2018

See all articles by Derek W. Bunn

Derek W. Bunn

London Business School

Stefan Kermer

Vienna University of Technology

Date Written: January 14, 2018

Abstract

We analyse the operational effects of market participants responding to price incentives for spillage and shortage positions in a single price, electricity balancing market. We consider optimal real-time decisions by generators and speculators based upon forecasts of the conditional distribution of the system imbalance and examine the effects of time delays for the consequent statistical arbitrage positions. We apply this to the Austrian imbalance settlement process within the German/Austrian integrated market. Results suggest that permitting additional intraday flexibility from a physical or a non-physical agent can be beneficial for the agents themselves, the system operator and market efficiency.

Keywords: Electricity, Real-time Markets, Trading, Forecasting, Statistical Arbitrage

JEL Classification: L94

Suggested Citation

Bunn, Derek W. and Kermer, Stefan, Statistical Arbitrage and Information Flow in an Electricity Balancing Market (January 14, 2018). Available at SSRN: https://ssrn.com/abstract=3101716 or http://dx.doi.org/10.2139/ssrn.3101716

Derek W. Bunn (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
0207 000 8000 (Phone)

Stefan Kermer

Vienna University of Technology ( email )

Karlsplatz 13
Vienna
Austria

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