Research Of Financial Derivative Instruments In Power Marketing For Risk Management

The worldwide restructuring and deregulation of electric power industry has led to an active electricity market with much more risk to market participants that they did not have to face during the regulated era .As effective tools for risk management and bilateral transaction, forward contracts or optional forward contracts, futures contract, option contract, have been widely used in competitive electricity markets, and in the future, swaps will also be used. So, to accelerate the electric industry healthily and orderly, systematic study of application of these financial derivative instrument to electricity power market exchange, which is the subject of this paper, is important and urgent.After introduction, three exchange modes of electricity market are compared in chapter 1. Chapter 2 reports a study of the use of forward contracts as risk sharing instruments for electricity industries operating under spot price, price setting and appropriate participant responses are discussed. Chapter 3 is concerned with electricity futures contract, the conception of electricity futures is introduced, the characteristics of electricity futures are detailedly discussed, the problems and difficulties in hedging with electricity futures are lucubrated, improved method is proposed. Chapter 4 briefly introduces the use of options and swaps in electricity market. Three type of option forward contract: interruptible, or callable, forward contract; its supply-side analogue, puttable contract; and their combination, bilateral optional electricity forward contract, are reported in chapter 5, these contracts allow market participants to take advantage of flexibility in generation or consumption to obtain a monetary benefit, while simultaneously removing the risk of market price fluctuations. In chapter 6 of this paper, various contracts for difference are discussed. The last part of this paper is conclusion and prospect.