The mechanism behind price formation in electricity futures markets is still under discussion. Theory suggests that hedging pressure caused by deviating risk preferences is the most promising approach. This paper contributes to this discussion through an empirical investigation of electricity...

Whilst the benefits of forward contracting for goods and services have been extensively researched in terms of mitigating market power effects in spot markets, we analyse how the risk in spot price formation induces a counteracting premium in the contract prices. We consider and test a...

This paper develops a methodology to test whether recent developments on world oil markets are in line with the hypothesis of efficient markets. We treat the joint hypothesis problem as stated by Fama (1970), Fama (1991), that market efficiency can only be assessed in conjunction with a price...

This paper introduces a novel method for pricing commodity index derivatives consistently with market prices of derivatives on single commodities. We discuss the Black, mean-reversion and local volatility pricing models with special attention paid to the parameterization of volatility surfaces....

Using a detailed data set of electricity forward prices in Central Europe, we compute the intra-day risk premium and market price of risk for the two electricity exchanges European Energy Exchange (EEX) and Energy Exchange Austria (EXAA). Given the significant volatility and jump risk of...

Aiming to study pricing of long-dated commodity derivatives, this paper presents a class of models within the Heath, Jarrow, and Morton (1992) framework for commodity futures prices that incorporates stochastic volatility and stochastic interest rate and allows a correlation structure between...

Does modelling stochastic interest rates, beyond stochastic volatility, improve pricing performanceon long-dated commodity derivatives? To answer this question, we consider futuresprice models for commodity derivatives that allow for stochastic volatility and stochastic interestrates and a...

We provide an empirical analysis of the relationship between spot and futures prices in interconnected regional Australian electricity markets. Examining ex-post risk premiums in futures markets, we find positive and significant risk premiums for several of the considered regions. Therefore,...

This paper presents an empirical study on hedging long-dated crude oil futures options with forward price models incorporating stochastic interest rates and stochastic volatility. Several hedging schemes are considered including delta, gamma, vega and interest rate hedge. Factor hedging is...