Application of VaR in financial risk analysis of electricity markets

Hao Zhou, Fuqiang Zhang, Hao Wu, Siu Lau Ho

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

1 Citation (Scopus)

Abstract

In this paper, the necessity to study financial risks in electricity markets, the application of the Value at Risk (VaR) method and the feasibility of historical simulations are firstly introduced and discussed. Then the gross profit, daily VaR and weekly VaR models of an electricity company (the unique buyer) based on practical conditions of the Zhejiang electricity markets are presented, and the corresponding computational results are reported. Furthermore, the application of historical simulations in financial risk investigations of electricity markets is analyzed, and the influence of the two factors (contracted price Pc and contract rate k) of CFD (Contract For Difference) on the company's gross profit and daily VaR are discussed. The numerical results revealed that the historical simulation is suitable to analyze and to predict the short-term financial risk (next day or next week) of electricity market. It is intuitive, simple and easy to implement.
Original languageEnglish
Title of host publicationSixth International Conference on Advances in Power System Control, Operation and Management - Proceedings
Pages354-359
Number of pages6
Volume1
Publication statusPublished - 1 Dec 2003
EventSixth International Conference on Advances in Power System Control, Operation and Management - Proceedings - Hong Kong, Hong Kong
Duration: 11 Nov 200314 Nov 2003

Conference

ConferenceSixth International Conference on Advances in Power System Control, Operation and Management - Proceedings
CountryHong Kong
CityHong Kong
Period11/11/0314/11/03

ASJC Scopus subject areas

  • Engineering(all)

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