Abstract
The numerous benefits of electricity forward trading come at a cost to consumers when a forward price contains a risk premium. An analysis based on the theory of cross hedging suggests that there is a risk premium of about 5 percent in the forward price for delivery at the Mid-Columbia hub of the Pacific Northwest. The existence of a relatively large risk premium suggests that forward contract buyers are more risk-averse than sellers. Copyright © 2011 Elsevier Inc. All rights reserved.
| Original language | English |
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| Pages (from-to) | 72-76 |
| Journal | Electricity Journal |
| Volume | 24 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2011 |