Energy markets

Gross P, Kovacevic RM, & Pflug GC (2013). Energy markets. In: Handbook of Risk Management in Energy Production and Trading. Eds. Kovacevic, RM, Pflug, GC & Vespucci, MT, pp. 3-24 USA: Springer. DOI:10.1007/978-1-4614-9035-7_1.

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Abstract

Most of the risks in energy production and trading are related to market prices. As a consequence, this first chapter provides a short introduction to energy markets. Products (or more precisely contracts) which are traded in energy markets can concern either the physical delivery of energy (physical settlement) or only the payment of the financial value of such a delivery (financial settlement). In the case of a physical settlement, the traded quantities directly influence the whole system; if the settlement is financial, trades are basically bets on prices. Motivated by this distinction, we separate this chapter into two major parts: The first part considers the physical side of markets, focusing on the physical spot markets for natural gas and electric power. The second part serves as an introduction to the financial aspects of the markets, describing derivatives on physical spot contracts. In both sections our geographical focus will be on European markets. Due to the inhomogeneities of market designs, we will focus on stylized market characteristics rather than details. We mainly consider natural gas and electricity due to their distinctively different behavior to financial markets.

Item Type: Book Section
Research Programs: Risk, Policy and Vulnerability (RPV)
Risk & Resilience (RISK)
Bibliographic Reference: In: RM Kovacevic, GC Pflug, MT Vespucci (Eds); Handbook of Risk Management in Energy Production and Trading; Springer US pp.3-24
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Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:49
Last Modified: 04 Apr 2016 10:15
URI: http://pure.iiasa.ac.at/10574

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