Portfolio Optimization In Electricity Trading With Limited Liquidity
AbstractIn principle, portfolio optimization in electricity markets can make use of the standard mean-variance model going back to Markowitz. Yet a key restriction in most electricity markets is the limited liquidity. Therefore the standard model has to be adapted to cope with limited liquidity. An application of this model shows that the optimal hedging strategy for generation portfolios is strongly dependent on the size of the portfolio considered as well as on the variance-covariancematrix used and the liquidity function assumed.
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Bibliographic InfoPaper provided by University of Duisburg-Essen, Chair for Management Science and Energy Economics in its series EWL Working Papers with number 0702.
Length: 20 pages
Date of creation: Jul 2007
Date of revision: Jul 2007
optimization; electricity; liquidity; electricity trading; mean-variance-model;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
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