A seasonal copula mixture for hedging the clean spark spread with wind power futures

Troels Sønderby Christensen, Anca Pircalabu, Esben Høg

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

5 Citationer (Scopus)
7 Downloads (Pure)

Abstrakt

The recently introduced German wind power futures have brought the opportunity to address the problem of volume risk in wind power generation directly. In this paper, we study the hedging benefits of these instruments in the context of peak gas-fired power plants, by employing a strategy that allows trading in the day-ahead clean spark spread and wind power futures. To facilitate hedging decisions, we propose a seasonal copula mixture for the joint behavior of the day-ahead clean spark spread and the daily wind index. The model describes the data surprisingly well, both in terms of the marginals and the dependence structure, while being straightforward and easy to implement. Based on Monte Carlo simulations from the proposed model, the results indicate that significant benefits can be achieved by using wind power futures. Moreover, a comparison study shows that accounting for asymmetry, tail dependence, and seasonality in the dependence structure is especially important in the context of risk management.

OriginalsprogEngelsk
TidsskriftEnergy Economics
Vol/bind78
Udgave nummerFebruary 2019
Sider (fra-til)64-80
Antal sider17
ISSN0140-9883
DOI
StatusUdgivet - 1 feb. 2019

Emneord

  • Clean spark spread; Wind power futures; Copula models; Time-varying dependence; Hedging.

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