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Ex ante and ex post risk premiums in electricity futures

Author

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  • M. Angeles Carnero
  • Stein-Erik Fleten
  • Ståle Størdal
  • Sjur Westgaard

Abstract

This paper examines ex post and ex ante risk premiums on Nordic electricity futures over different time horizons, using commercial-grade forecasts from 2013–2024. It assesses the variation in risk premiums with supply scarcity and with seasons, and analyzes higher moments (skewness and kurtosis) in these contexts. The study finds that ex post premiums usually surpass ex ante premiums, with significantly negative premiums in summer across all contracts. Additionally, risk premiums tend to increase during periods of limited hydropower production opportunities. The analysis highlights the importance of skewness in risk premiums, noting positive skewness during autumn and winter.

Suggested Citation

  • M. Angeles Carnero & Stein-Erik Fleten & Ståle Størdal & Sjur Westgaard, 2025. "Ex ante and ex post risk premiums in electricity futures," Quantitative Finance, Taylor & Francis Journals, vol. 25(11), pages 1717-1729, November.
    • Handle: RePEc:taf:quantf:v:25:y:2025:i:11:p:1717-1729
    DOI: 10.1080/14697688.2025.2551768
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