Hedging Strategy and Electricity Contract Engineering - IFOR

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210 Bibliography [WH97] J. A. C. Woodley and H. L. Hunt. Reinventing the Electricity Industry, in the US Power Market. Risk publications, London, 1997. [Won01] A. Wong. Pricing electricity derivatives in a multi-factor model. Master’s thesis, University of Stockholm, 2001.
Curriculum Vitae Personal Data Name: Gustaf Sebastian Björnson Unger Date of birth: April 27th, 1973 Place of birth: Nacka, Sweden Nationality: Sweden Martial staus: Single Education 1980–1989 Primary school in Saltsjöbaden, Sweden 1989–1992 Secondary school in Saltsjöbaden, Sweden 1995–1999 Study of Business Administration and Economics, Stockholm School of Business, Sweden 1995–2000 Study of Mechanical Engineering, Royal Institute of Technology, Sweden 2000–today Doctoral student at the Institute for Operations Research, ETH Zürich Experience 1993–1993 Digital Equipment Company, Sweden - software development 1993–1995 Royal Swedish Navy, Sweden 1999–2000 Investor AB, Sweden - risk management 2000–today McKinsey & Co, Switzerland - corporate finance
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Diss. ETH No. 14727 Hedging Strateg
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Abstract This thesis studies risk m
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Zusammenfassung Die vorliegende Sch
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Contents Acknowledgements ¡ ¢ ¡
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Contents xi 5.1 Overview . . . . .
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List of Figures 2.1 Illustration of
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List of Figures xv 7.6 Marginal val
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List of Tables 2.1 Spot market bid.
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Chapter 1 Introduction 1.1. Motivat
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1.3 Structure of the thesis 5 hedge
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Chapter 2 The electricity market 2.
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2.1 Overview 9 Generation ¥ Distri
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2.2 Liberalization of the electrici
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duction cost Marginal pro © 2.3 Su
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2.4 Transmission costs 15 10 Peak l
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2.4 Transmission costs 17 destinati
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2.5 Demand 19 2.5. Demand Compared
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2.6 Special characteristics of elec
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2.7 Electricity contracts 23 tions.
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0& K $ 0& K K % + $ 2.7 Electricity
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2.7 Electricity contracts 27 2.7.2.
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04 04 2.7 Electricity contracts 29
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2.8 Power exchanges and pricing mec
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2.8 Power exchanges and pricing mec
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S 0 eH aIKJ 2.9 Price dynamic 35 To
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2.9 Price dynamic 37 400 2000 350 1
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2.9 Price dynamic 39 simple sinus f
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2.9 Price dynamic 41 1800 1800 1600
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2.10 Summary 43 To deal with the un
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Chapter 3 Risk management 3.1. Over
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3.3 The risks in the electricity ma
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3.3 The risks in the electricity ma
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3.4 Traditional risk management mod
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l H xg yLihkjml f 3.5 The need for
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3.5 The need for a new risk measure
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R S x GaRKV is convex and continuou
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R P 3.6 Multi period risk managemen
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“ “ “ 3.7 Valuation models 67
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3.7 Valuation models 69 storability
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3.7 Valuation models 71 by introduc
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“ 3.7 Valuation models 73 formula
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Chapter 4 Contract engineering 4.1.
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4.2 Gas turbine 77 2000 1800 1600 1
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4.2 Gas turbine 79 220 200 Capped l
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4.3 Hydro storage plant 81 facilita
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¢ 4.3 Hydro storage plant 83 I k L
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x k xœk x «k š xœk 0 š x «k 0
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4.4 Coal plant and oil plant 87 4.4
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4.4 Coal plant and oil plant 89 cor
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4.5 Nuclear plant 91 of 1000 MW. Ov
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4.7 All production plants 93 possib
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4.8 Transmission lines 95 Unit type
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4.9 Real option theory 97 The scien
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4.10 Value of different production
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4.12 Summary 101 like the capped sp
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Chapter 5 Hedging strategies 5.1. O
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È È È È È 5.2 Traditional hedg
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É È É È Ì 5.2 Traditional hedg
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5.3 Relevance for electricity hedgi
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5.4 Best Hedge 111 that the expecte
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5.4 Best Hedge 113 that they alread
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Chapter 6 Power portfolio optimizat
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6.3 Power portfolio optimization in
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6.3 Power portfolio optimization in
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6.4 Modeling of plants and their op
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x k xëk x ìk Ü xë k 0Ü x ìk 0
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gìi Û S í SÜ D í DÜ I a í I
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õ õ 6.5 Analysis of optimal dispa
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õ Ü r á 6.5 Analysis of optimal
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¢ é á 6.5 Analysis of optimal di
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ìj Û 1 bë j Ý?Ü j 1Ü á?á@á
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u ¦ j Ü è è aëj ¦ bë j u j
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õ õ õ á á 6.5 Analysis of opti
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6.6 Power portfolio optimization wi
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è á 6.6 Power portfolio optimizat
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x Û x p Ü x c Ý Û xë1 Ü á@á
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ááá ááá ááá ááá ááá
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F Û 0Ü 3Ý í è F Û 0Ü 1Ý?Ü
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ö 6.6 Power portfolio optimization
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Page 179 and 180: ¢ ¢ 6.6 Power portfolio optimizat
Page 181 and 182: î yú1 î é yú1 á ¢ 6.6 Power
Page 183 and 184: 6.7 Summary 167 opportunity set wou
Page 185 and 186: Chapter 7 Case study In this chapte
Page 187 and 188: 171 3200 140 3000 2800 120 2600 240
Page 189 and 190: S7 D7 min 8 0 if S i or D p otherwi
Page 191 and 192: 175 Production Spot price Demand [C
Page 193 and 194: 7.1 Efficient frontier 177 lG x 6 9
Page 195 and 196: 7.2 Spot position 179 of the old po
Page 197 and 198: 7.3 Hedging value of water 181 The
Page 199 and 200: 7.4 Value decomposition 183 expecte
Page 201 and 202: MWh CHF/ P 7.4 Value decomposition
Page 203 and 204: 7.6 Summary 187 2500 2000 Dispatch
Page 205 and 206: 7.6 Summary 189 We have quantified
Page 207 and 208: Chapter 8 Conclusions The special c
Page 209 and 210: a4q V a4q G 1 V H a4q 6 Appendix A
Page 211 and 212: 8 _ 195 Proof The results follow im
Page 213 and 214: g b4i d G9:7j b4 j G 1 9j7j H b4 j
Page 215 and 216: Ax 3 V AxK1 G 1 V H AxK2 V b 1 G 1
Page 217 and 218: Bibliography [ABA98] [AD80] [ADEH97
Page 219 and 220: Bibliography 203 [BS73] [BS98] [BT0
Page 221 and 222: Bibliography 205 [GR92] H. Gravelle
Page 223 and 224: Bibliography 207 [Mer76] R. C. Mert
Page 225: Bibliography 209 [SC89] [Sch90] [Sc
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