TY - JOUR
T1 - A seasonal copula mixture for hedging the clean spark spread with wind power futures
AU - Christensen, Troels Sønderby
AU - Pircalabu, Anca
AU - Høg, Esben
PY - 2019/2/1
Y1 - 2019/2/1
N2 - 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.
AB - 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.
KW - Clean spark spread; Wind power futures; Copula models; Time-varying dependence; Hedging.
KW - Clean spark spread
KW - Wind power futures
KW - Copula models
KW - Time-varying dependence
KW - Hedging
UR - http://www.scopus.com/inward/record.url?scp=85057056029&partnerID=8YFLogxK
UR - http://vbn.aau.dk/en/publications/a-seasonal-copula-mixture-for-hedging-the-clean-spark-spread-with-wind-power-futures(44095dd3-5839-4746-b22c-68c6bd496c2d).html
U2 - 10.1016/j.eneco.2018.11.002
DO - 10.1016/j.eneco.2018.11.002
M3 - Journal article
SN - 0140-9883
VL - 78
SP - 64
EP - 80
JO - Energy Economics
JF - Energy Economics
IS - February 2019
ER -