In the electricity sector, most of the trades are still done in the OTC market without direct mitigation of credit risk. Newer discussions fuelled by the European Commission (EUCOM 2009a,b) show that there is a political will to enforce a stronger collateralization policy on all European...

In the electricity sector, most of the trades are still done in the OTC market without direct mitigation of credit risk. Newer discussions fuelled by the European Commission (EUCOM 2009a,b) show that there is a political will to enforce a stronger collateralization policy on all European...

The aim of this study is to analyze the impact of credit risk mitigation via margining on the optimal portfolio selection for power plants. We develop a model to estimate margining cashflows that is based on the clearing framework of the European Commodity Clearing AG (ECC), on stochastic...