Selective hedging in hydro-based electricity companies

Sanda, Gaute Egeland; Olsen, Eirik Tandberg; Fleten, Stein–Erik

doi:10.1016/j.eneco.2013.06.018

Cited by 25 publications

(9 citation statements)

References 37 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Leoni et al (2013) investigate hedging strategies for the energy derivatives. Sanda et al (2013) analyse the risk management trends in the electricity commodity markets.…”

mentioning

confidence: 99%

Commodity price risk management using option strategies

Rusnáková¹

2015

Agric. Econ. - Czech

View full text Add to dashboard Cite

Abstract:In the world of increasing price volatility, it is more important than ever to understand how to manage the price risk. Th e paper deals with the price risk management issues associated with commodities. Using options is performed by an analysis of hedging strategies in the commodity market. Th e authors focus on the application of the vanilla option strategies to risk manage ment in order to point out the advantages and disadvantages of each hedging strategy. Based on the general expressions of selling price intervals, there are modelled various hedged scenarios of wheat. Th e authors look at the wheat option contracts traded on the Chicago Board of Trade. Th e comparative comparison of the option hedging strategies has shown the best results for the commodity seller who hedges against a price decline.

show abstract

“…Leoni et al (2013) investigate hedging strategies for the energy derivatives. Sanda et al (2013) analyse the risk management trends in the electricity commodity markets.…”

mentioning

confidence: 99%

Commodity price risk management using option strategies

Rusnáková¹

2015

Agric. Econ. - Czech

View full text Add to dashboard Cite

show abstract

“…Lohman and Hildyard (2014) explain this as the increasing commodification of uncertainty through hedging mechanisms as a means of estimating the cost of risks. Sanda et al (2013) revealed in a study of 12 Norway hydropower utilities that their hedging policy strategies were a source of significant profit. In other words, higher risks generate higher potential profits, rather than benefits.…”

Section: Explain How Neoliberal Policy Reform Facilitated Thismentioning

confidence: 99%

Framing hydropower as green energy: assessing drivers, risks and tensions in the Eastern Himalayas

Ahlers¹,

Budds²,

Joshi³

et al. 2014

Preprint

View full text Add to dashboard Cite

The culturally and ecologically diverse region of the Eastern Himalayas is the target of ambitious hydropower development plans. Policy discourses at national and international levels position this development as synergistically positive: it combines the production of clean energy to fuel economic growth at regional and national levels with initiatives to lift poor mountain communities out of poverty. Different from hydropower development in the 20th century in which development agencies and banks were important players, contemporary initiatives importantly rely on the involvement of private actors, with a prominent role of the private finance sector. This implies that hydropower development is not only financially viable but also understood as highly profitable. This paper examines the new development of hydropower in the Eastern Himalayas of Nepal and India. It questions its framing as green energy, interrogates its links with climate change, and examines its potential for investment and capital accumulation. To do this, we also review the evidence on the extent to which its construction and operation may modify existing hydrogeological processes and ecosystems, as well as its impacts on the livelihoods of diverse groups of people that depend on these. The paper concludes that hydropower development in the region is characterized by inherent contentions and uncertainties, refuting the idea that dams constitute development projects whose impacts can be simply predicted, controlled and mitigated. Indeed, in a highly complex geological, ecological, cultural and political context that is widely regarded to be especially vulnerable to the effects of climate change, hydropower as a development strategy makes for a toxic cocktail.

show abstract

“…Using an OLS model and a moving window to allow for time variation, he documents relatively poor performance using a measure based on accumulated gain but notes that this may relate to ambiguity about the goals of a hedging strategy whereby risk minimisation may not be the main objective. More recently, Sanda, Olsen, & Fleten, () look at company level hedging for hydro‐based electricity companies and find that over 90% of aggregate production is hedged. They use cash flow at risk rather than the variance as their measure of hedging efficacy and find that only 1 of 12 companies showed a significant reduction in monthly cash flow variance.…”

Section: Introductionmentioning

confidence: 99%

The efficacy of financial futures as a hedging tool in electricity markets

Hanly

Morales²,

Cassells

2018

Int. J Fin Econ

View full text Add to dashboard Cite

This paper estimates and applies a risk management strategy for electricity spot exposures using futures hedging. We apply our approach to 3 of the most actively traded European electricity markets, Nordpool, APXUK, and Phelix. We compare both optimal hedging strategies and the hedging effectiveness of these markets for 2 hedging horizons, weekly and monthly using both Variance and Value at Risk. Our key finding is that electricity futures can effectively manage risk only for specific time periods when using hedging strategies that have been very successful in financial and other commodity markets. More generally, they are ineffective as a risk management tool when compared with other energy assets. This is especially true at the weekly frequency. We also find significant differences in both the optimal hedge ratios and the hedging effectiveness of the different electricity markets. Better performance is found for the Nordpool market, whereas the poorest performer in hedging terms is the Phelix market.

show abstract

Selective hedging in hydro-based electricity companies

Cited by 25 publications

References 37 publications

Commodity price risk management using option strategies

Commodity price risk management using option strategies

Framing hydropower as green energy: assessing drivers, risks and tensions in the Eastern Himalayas

The efficacy of financial futures as a hedging tool in electricity markets

Contact Info

Product

Resources

About