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Power Prices Today: Growing More Unpredictable

Even the volatility is volatile. And that can play havoc with hedging.
Fortnightly Magazine - October 1 2002
  1. difficult. This is also why the price of an option may often be much greater than the value calculated from a standard model. It is also why option and other price insurance markets are often thin and why markets that join counter-parties with different price exposures (generators vs. large buyers of the commodity) are successful.
  2. For many examples of different types of behavior for price and other related economic variables and how to represent them, see Anindya Banerjee, Juan Dolado, John W. Galbraith, and David F. Hendry, , New York, Oxford University Press, 1993.
  3. See Notice: Platt's proposes methodology refinements. , July 1, 2002. This notice was also printed in its July 7 issue.
  4. For a full discussion of the current state of distributed generation and some indication of how price risk frameworks can aid in determining the value of these assets and instruments, see Jonathan A. Lesser and Charles D. Feinstein, Distributed Generation: Hype vs. Hope. , June 1, 2002, pp. 20-28; Ahmad Faruqui and Melanie Maulden, The Barriers to Real Time: Separating Fact From Fiction, , July 15, 2002, pp. 30-40.

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