Analysis of the Dynamics of the Brazilian Forward Market of Electricity

Luz, Cristina Pimenta de Mello Spineti; Gomes, Leonardo Lima; Brandão, Luiz Eduardo Teixeira

doi:10.7819/rbgn.v14i44.1207

RBGN

2012

DOI: 10.7819/rbgn.v14i44.1207

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Analysis of the Dynamics of the Brazilian Forward Market of Electricity

Cristina Pimenta de Mello Spineti Luz

Leonardo Lima Gomes

Luiz Eduardo Teixeira Brandão

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2023

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Analyzing Risk Premiums in the Brazilian Power Market: A Quantitative Study

Kristiansen

2023

Commodities

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This paper conducts an empirical analysis of risk premiums in the Brazilian electricity market, a critical but understudied field. Employing two distinct methodologies—Average Forward Prices and Last Observed Forward Prices—the study calculates risk premiums between spot and forward electricity prices. Our analysis consistently identifies negative risk premiums, which serve as indicators that the market may be underestimating certain types of risk. These underestimations are potentially influenced by inherent market uncertainties, including volatile demand, unpredictable supply, and frequent regulatory shifts. Additionally, we observe a high volatility in risk premiums, signifying a dynamic and ever-changing market where expectations are continuously recalibrated. Such conditions present possible arbitrage opportunities for market actors and underline the need for policymakers to introduce measures mitigating market unpredictability. By focusing on these nuances, this paper enriches the broader discourse on risk premiums in electricity markets and underscores the necessity for further research aimed at devising effective risk management strategies.

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Analyzing Risk Premiums in the Brazilian Power Market: A Quantitative Study

Kristiansen

2023

Commodities

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Analysis of the Dynamics of the Brazilian Forward Market of Electricity

Cited by 1 publication

References 1 publication

Analyzing Risk Premiums in the Brazilian Power Market: A Quantitative Study

Analyzing Risk Premiums in the Brazilian Power Market: A Quantitative Study

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