Upstream producers that possess market power, sell forwards with a lengthy duration to regional electricity companies … (REC). As part of the liberalization of the electricity market, RECs have been privatized and exposed to a possible … welfare maximizing market instrument. …

In this paper, we derive optimal hedging strategies for options in electricity futures markets. Optimality is measured … principle. Our explicit results are particularly useful for electricity retailers, who have sold an option to a client, and now … want to hedge the payoff of this option by investing into an electricity futures and into the issued option itself. Another …