Portfolio optimisation of power futures market: Evidence from France and Germany
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: International Journal of Public Policy, Jahrgang 14, Nr. 1-2, 2018, S. 120-144.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Portfolio optimisation of power futures market
T2 - Evidence from France and Germany
AU - Fianu, Emmanuel Senyo
PY - 2018
Y1 - 2018
N2 - Understanding the nature of power futures is particularly crucial, for non-storable commodities such as wholesale electricity since it has been deregulated. This paper examines different types of optimisation techniques and provides a temporal analysis of energy future prices. In particular, it highlights how one of the well-known elements of modern finance theory could improve the accuracy of evaluating the risk exposure inherent in power futures market via a modified version of the mean-variance portfolio (MVP) theory. The optimisation techniques employed account for the initial capital requirement of the energy futures and estimate the optimal weights needed to mitigate the downside risk inherent in the energy futures market. One major finding of this paper shows that, a portfolio of energy prices with different maturities could provide market players with a less risky investment in the energy market. In addition, the feasibility of the methodologies utilised have been presented.
AB - Understanding the nature of power futures is particularly crucial, for non-storable commodities such as wholesale electricity since it has been deregulated. This paper examines different types of optimisation techniques and provides a temporal analysis of energy future prices. In particular, it highlights how one of the well-known elements of modern finance theory could improve the accuracy of evaluating the risk exposure inherent in power futures market via a modified version of the mean-variance portfolio (MVP) theory. The optimisation techniques employed account for the initial capital requirement of the energy futures and estimate the optimal weights needed to mitigate the downside risk inherent in the energy futures market. One major finding of this paper shows that, a portfolio of energy prices with different maturities could provide market players with a less risky investment in the energy market. In addition, the feasibility of the methodologies utilised have been presented.
KW - Electricity futures
KW - Energy markets
KW - Investment risk management
KW - Portfolio optimisation
KW - Portfolio theory
KW - Sustainability Science
KW - Economics
UR - http://www.scopus.com/inward/record.url?scp=85045017723&partnerID=8YFLogxK
U2 - 10.1504/IJPP.2018.090690
DO - 10.1504/IJPP.2018.090690
M3 - Journal articles
AN - SCOPUS:85045017723
VL - 14
SP - 120
EP - 144
JO - International Journal of Public Policy
JF - International Journal of Public Policy
SN - 1740-0600
IS - 1-2
ER -