eprintid: 207
rev_number: 4
eprint_status: archive
userid: 6
dir: disk0/00/00/02/07
datestamp: 2009-02-18
lastmod: 2015-05-29 19:49:24
status_changed: 2009-04-15 09:26:07
type: report
metadata_visibility: show
item_issues_count: 0
creators_name: Dewynne, Jeff
creators_name: Davy, Pam
contributors_name: Kucera, Adam
contributors_name: Bertram, Will
contributors_name: Jun, Cheng
title: Optimal Hedging Strategies for Australian Electricity Retailers
ispublished: pub
subjects: utilities
studygroups: misg25
companyname: Integral Energy
full_text_status: public
problem_statement: The aim of this project is to explore approaches to obtaining "optimal" hedging strategies for controlling the risk the retailer is exposed to using a given set of derivative contracts. The committed load exposure facing Integral Energy from the ETEF roll-off will be the sample hedging problem under consideration.
Some of the issues involved may include:

1. Choice of objective function for the optimisation:
a. Value at Risk;
b. Earnings at Risk;
c. Profit at Risk.

2. An appropriate and/or tractable definition of “optimal” must be established. Typically, stochastic optimisation problems involve one of the following:
a. maximising return for a given level of risk;
b. minimising risk for a given level of return; or
c. maximising the expected utility of a strategy.

3. Specification of the model for the price/demand process:
a. Continuous time model;
b. Discrete time model.

4. The appropriate class of derivative contracts must be identified for establishing the hedge. Available classes include:
a. Energy derivatives (e.g. swaps, caps, futures);
b. Weather derivatives.

This is a fairly open ended problem. Data is available to back-test any models that might be implemented.
date: 2008
date_type: published
pages: 24
citation:   Dewynne, Jeff and Davy, Pam  (2008) Optimal Hedging Strategies for Australian Electricity Retailers.  [Study Group Report]     
document_url: http://miis.maths.ox.ac.uk/miis/207/1/misg2008integral.pdf