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Markets: Organisation, Trading and Efficiency

In: Economics of Power Systems

Author

Listed:
  • Christoph Weber

    (University of Duisburg-Essen)

  • Dominik Möst

    (TU Dresden)

  • Wolf Fichtner

    (Karlsruhe Institute of Technology (KIT))

Abstract

With the introduction of competition in the electricity sector, trading has become a key activity affecting most segments of the electricity sector. This chapter introduces basic notions like the distinction between bilateral and mediated trading (the latter including energy exchanges) and between auction-based and continuous trading. Also further market design choices including the uniform pricing versus pay-as-bid clearing or the differentiation between single and multi-part (or complex) bids are introduced. These play an important role to understand the main market segments, namely spot and futures markets as well as further derivatives like options. The (asymmetric) link between spot and future markets is discussed in detail as well as its link to the theoretical concept of information efficiency. The law of one price as an implication of information efficiency and the impact of (non-)storability for the link between spot and future prices are also highlighted. Finally the basic option types, namely call options and put options, the role of the option premium and the payoff functions are illustrated, considering both long and short positions of traders.

Suggested Citation

  • Christoph Weber & Dominik Möst & Wolf Fichtner, 2022. "Markets: Organisation, Trading and Efficiency," Springer Texts in Business and Economics, in: Economics of Power Systems, chapter 0, pages 271-291, Springer.
    • Handle: RePEc:spr:sptchp:978-3-030-97770-2_8
    DOI: 10.1007/978-3-030-97770-2_8
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