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The Forward Premium in the Nord Pool Power Market

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Listed:
  • Erik Haugom
  • Guttorm A. Hoff
  • Peter Molnár
  • Maria Mortensen
  • Sjur Westgaard

Abstract

This article investigates the forward premium of futures contracts in the Nordic power market for the time period from January 2004 to December 2013. We find that futures prices are biased predictors of the subsequent spot prices and that there is a significant forward premium in the Nord Pool market, particularly during the winter and autumn. We analyze the impact from several factors on the forward premium. The spot price, and the deviation of water inflow from its usual level, positively affect the forward premium. The variance of the spot price also has a positive effect on the forward premium, but only for the contract closest to delivery.

Suggested Citation

  • Erik Haugom & Guttorm A. Hoff & Peter Molnár & Maria Mortensen & Sjur Westgaard, 2018. "The Forward Premium in the Nord Pool Power Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(8), pages 1793-1807, June.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:8:p:1793-1807
    DOI: 10.1080/1540496X.2018.1441021
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    Citations

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    Cited by:

    1. Tadahiro Nakajima, 2019. "Expectations for Statistical Arbitrage in Energy Futures Markets," JRFM, MDPI, vol. 12(1), pages 1-12, January.
    2. Tarjei Kristiansen, 2023. "Analyzing Risk Premiums in the Brazilian Power Market: A Quantitative Study," Commodities, MDPI, vol. 2(4), pages 1-16, November.
    3. Erik Haugom & Peter Molnár & Magne Tysdahl, 2020. "Determinants of the Forward Premium in the Nord Pool Electricity Market," Energies, MDPI, vol. 13(5), pages 1-18, March.
    4. Cao, K.H. & Qi, H.S. & Tsai, C.H. & Woo, C.K. & Zarnikau, J., 2021. "Energy trading efficiency in the US Midcontinent electricity markets," Applied Energy, Elsevier, vol. 302(C).
    5. Størdal, Ståle & Ewald, Christian-Oliver & Lien, Gudbrand & Haugom, Erik, 2023. "Trading time seasonality in electricity futures," Journal of Commodity Markets, Elsevier, vol. 31(C).
    6. Ewald, Christian-Oliver & Haugom, Erik & Lien, Gudbrand & Størdal, Ståle & Wu, Yuexiang, 2022. "Trading time seasonality in commodity futures: An opportunity for arbitrage in the natural gas and crude oil markets?," Energy Economics, Elsevier, vol. 115(C).

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