Corpus ID: 211146124

The Market Price of Risk for Delivery Periods: Pricing Swaps and Options in Electricity Markets

  title={The Market Price of Risk for Delivery Periods: Pricing Swaps and Options in Electricity Markets},
  author={Annika Kemper and M. Schmeck and Anna Kh. Balci},
  journal={arXiv: Pricing of Securities},
In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an arbitrage-free pricing framework for derivatives based on these contracts. Furthermore, we use a weighted geometric averaging of an artificial geometric futures price over the corresponding delivery period. Without any need for approximations, this averaging… Expand

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