http://www.erasmusenergy.com en-us N/A dejong@kyos.com Tue, 06 Jan 2009 02:23:30 CET 20 http://www.erasmusenergy.com/articles/125/1/Is-there-a-term-structure-of-futures-volatilities-Reevaluating-the-Samuelson-Hypothesis/Page1.html Published in: Journal of derivatives
Publication year: 1996
Co-author 1: Jay F. Coughenour
Co-author 2: Paul J. Seguin
Co-author 3: Margaret Monroe Smeller

The Samuelson hypothesis implies that the volatility of futures price changes increases as a contract's delivery date nears. In markets where the Samuelson hypothesis holds, accurate valuation of futures-related derivatives requires that a term structure of futures volatilities be estimated. We develop a framework for predicting those markets where the Samuelson hypothesis should be expected to hold.
In contrast to a prominent reinterpretation of the hypothesis, we show that clustering of information flows near the delivery date is not a necassary condition. We show instead that the hypothesis will generally be supported in markets where spot price changes include a predictable temporary component, and we argue that this condition is much more likely to be met in markets for real assets than for financial assets. Finally, we provide empirical evidence consistent with our predictions.]]> no@spam.com (Hendrik Bessembinder) Mon, 17 Dec 2007 15:46:28 CET http://www.erasmusenergy.com/articles/125/1/Is-there-a-term-structure-of-futures-volatilities-Reevaluating-the-Samuelson-Hypothesis/Page1.html http://www.erasmusenergy.com/articles/121/1/Equilibrium-Pricing-and-Optimal-Hedging-In-Electricity-Forward-Markets/Page1.html Published in:
Publication year: 2000
Co-author 1:  Michael Lemmon

Spot power prices are volatile and, since electricity cannot be economically stored, familiar arbitragebased methods are not applicable for pricing power derivative contracts. This paper presents an equilibrium model implying that the forward power price is a downward biased predictor of the future spot price if expected power demand is low and demand risk is moderate. However, the equilibrium forward premium increases when either expected demand or demand variance is high, due to positive skewness induced in the spot power price distribution. Optimal forward positions for power producing and retailing firms depend on forecast power demand and on the skewness of power prices. Preliminary empirical evidence indicates that the premium in forward power prices is positively related to expected demand, and is large during the summer months.]]> no@spam.com (Hendrik Bessembinder) Thu, 13 Dec 2007 19:26:26 CET http://www.erasmusenergy.com/articles/121/1/Equilibrium-Pricing-and-Optimal-Hedging-In-Electricity-Forward-Markets/Page1.html http://www.erasmusenergy.com/articles/47/1/Pricing-an-gains-from-trading-in-competitive-electric-power-markets/Page1.html Published in:
Publication year: 1999
Co-author 1: Michael L. Lemmon

We consider retail prices and efficiency gains from wholesale trading in both regulated and competitive power markets. Wholesale power trading facilitates risk sharing, so that the minimally-required retail price decreases for all producers. A portion of the efficiency gains can be captured by use of bilateral foward contracts arranged in advance, while the remainder requires real-time trading. There is cross-sectional variation in the benefits from wholesale trading, with the largest efficiency gains accruing in regions with low power betas. Prices in competitive markets depend on system production capacity. We consider the special case where capital investment was selected to minimize expected costs in the absence of wholesale markets, and show that competition decreases prices but imposes economic losses on producers. That is, the so-called stranded investment problem can exist even with ex ante efficient capital investment.]]> no@spam.com (Hendrik Bessembinder) Thu, 27 Sep 2007 15:02:04 CEST http://www.erasmusenergy.com/articles/47/1/Pricing-an-gains-from-trading-in-competitive-electric-power-markets/Page1.html