Analysis of the financial margins required to hedge risks in electric power futures markets
One of the strengths of futures markets is the elimination of counterparty risk, but to accomplish this, it is important to consider the financial guarantees the clearing house requires from market participants. These margins must hedge the risk related to extreme variations in the product price, bu...
- Autores:
-
Pantoja-Robayo, Javier
Angarita, Kelly Maradey
Trespalacios Carrasquilla, Alfredo
- Tipo de recurso:
- Fecha de publicación:
- 2017
- Institución:
- Universidad EAFIT
- Repositorio:
- Repositorio EAFIT
- Idioma:
- spa
- OAI Identifier:
- oai:repository.eafit.edu.co:10784/13119
- Acceso en línea:
- http://hdl.handle.net/10784/13119
- Palabra clave:
- G12
G14
G18
Electric power futures market
Electric power spot market
Value at Risk
Conditional Value at Risk
Colombia
Mercado de derivados de energía eléctrica
Mercado spot de energía eléctrica
Valor en Riesgo
Valor en Riesgo Condicional
Colombia
- Rights
- License
- Copyright (c) 2017 Javier Pantoja-Robayo, Kelly Maradey Angarita, Alfredo Trespalacios Carrasquilla
Summary: | One of the strengths of futures markets is the elimination of counterparty risk, but to accomplish this, it is important to consider the financial guarantees the clearing house requires from market participants. These margins must hedge the risk related to extreme variations in the product price, but they should not be excessive to avoid limiting the number of participants in the market. In this paper we propose a new methodology to provide appropriate margins in the electricity futures market, and we present an application for the Colombian market. We conduct a Monte Carlo simulation to assess the daily changes of the futures price and estimate measures of risk for different scenarios for “El Niño” weather conditions, holding periods, and expiration times. We find that the new methodology substantially modifies required financial guarantee levels compared to the methodology currently used to calculate margins. |
---|