Bidding strategies that minimize risk with options and futures contracts
- Iowa State Univ., Ames, IA (United States). Electrical and Computer Engineering
This research builds on earlier research in developing bidding strategies through the inclusion of options and future contracts. In the competitive environment, electric traders` profits depends on the implementation of a successful bidding strategy. Bidding strategies are studied in an environment in which distribution companies (DISTCOs) and generation companies (GENCOs), buy and sell power via double auctions in regional commodity exchanges. The market framework being used was proposed by Kumar and Sheble and allows participants to trade in the spot, future, planning and swap markets, and also gives rise to the use of option contracts. Bid-strategy research previously published by the authors focused on increasing electric generators` profit as they participated in a spot/cash market. Here the authors incorporate techniques such as game theory and decision analysis to minimize the risk to the electric utility or energy trader. The goal is to ensure reliable power system operation while also ensuring that contracts are fulfilled and traders adopting the strategies remain profitable. The developed strategies are tested in the electric market trading simulator which can be used off-line to predict whether bid strategies will be profitable and successful.
- OSTI ID:
- 319012
- Report Number(s):
- CONF-980426--
- Country of Publication:
- United States
- Language:
- English
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