The trading activity in the German intraday electricity market has increased significantly over the last years. This is partially due to an increasing share of renewable energy, wind and photovoltaic, which requires power generators to balance out the forecasting errors in their production. We investigate the bidding behaviour in the intraday market by looking at both last prices and continuous bidding, in the context of a fundamental model. A unique data set of 15-minute intraday prices and intraday-updated forecasts of wind and photovoltaic has been employed and price bids are modelled by prior information on fundamentals. We show that intraday prices adjust asymmetrically to both forecasting errors in renewables and to the volume of trades dependent on the threshold variable demand quote, which reflects the expected demand covered by the planned traditional capacity in the day-ahead market. The location of the threshold can be used by market participants to adjust their bids accordingly, given the latest updates in the wind and photovoltaic forecasting errors and the forecasts of the control area balances.
In this paper we provide a framework that explains how the market risk premium, defined as the difference between forward prices and spot forecasts, depends on the risk preferences of market players and the interaction between buyers and sellers. In commodities markets this premium is an important indicator of the behavior of buyers and sellers and their views on the market spanning between short-term and long-term horizons. We show that under certain assumptions it is possible to derive explicit solutions that link levels of risk aversion and market power with market prices of risk and the market risk premium. We apply our model to the German electricity market and show that the market risk premium exhibits a term structure which can be explained by the combination of two factors. Firstly, the levels of risk aversion of buyers and sellers, and secondly, how the market power of producers, relative to that of buyers, affects forward prices with different delivery periods.
Rating transition matrices for sovereigns are an important input to risk management of portfolios of emerging market credit exposures. They are widely used both in credit portfolio management and to calculate future loss distributions for pricing purposes.However, few sovereigns and almost no low credit quality sovereigns have ratings histories longer than a decade, so estimating such matrices is difficult. This paper shows how one may combine information from sovereign defaults observed over a longer period and a broader set of countries to derive estimates of sovereign transition matrices. * Birkbeck College, yhu@econ.bbk.ac.uk ** London School of Economics, r.t.kiesel@lse.ac.uk *** Birkbeck College, Bank of England and CEPR, wperraudin@econ.bbk.ac.ukThe authors thank Paul Radford, John Waterman and other ECGD staff, and an anonymous referee for extremely helpful comments. Views expressed are those of the authors and not necessarily those of the Bank of England.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.