A new index for electricity spot markets

作者：Falbo Paolo^*; Fattore Marco; Stefanie Silvana

来源：Energy Policy, 2010, 38(6): 2739-2750.

DOI：10.1016/j.enpol.2010.01.004

• Electricity markets
• Market index
• Derivative pricing

Different indexes are used in electricity markets worldwide to represent the daily behavior of spot prices. However, the peculiarities of these markets require a careful choice of the index, based on mathematical formulation and its statistical properties. Choosing a bad index may influence the financial policies of market players, since derivative pricing and hedging performance can be deeply affected.
In this paper with an initial theoretical analysis, we intend to show that the most widely used indexes (simple arithmetic average and weighted average with current volumes) are poor representatives of the spot market. We will then perform an analysis of the hedging strategy on a derivative instrument (an Asian option) written on a reference index. The resulting simulations, applied to OMEL (Spain) and EEX (Germany), are sufficiently clear cut to suggest that the decision to adopt an index to represent properly a market must be taken very carefully. Finally we will propose a new index (FAST index) and, after comparing it with the previous indexes, will show that both theoretically and practically this index can be taken as a good electricity market synthetic indicator.

• 出版日期2010-6