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Market Makers and Liquidity Premium in Electricity Futures Markets

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  • Juan Ignacio Peña
  • Rosa Rodriguez

Abstract

This paper studies the forward premium as a liquidity premium in electricity futures markets as determined by producers and retailers’ demand for immediacy.

Suggested Citation

  • Juan Ignacio Peña & Rosa Rodriguez, 2022. "Market Makers and Liquidity Premium in Electricity Futures Markets," The Energy Journal, , vol. 43(2), pages 91-110, March.
    • Handle: RePEc:sae:enejou:v:43:y:2022:i:2:p:91-110
    DOI: 10.5547/01956574.43.2.jpen
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    References listed on IDEAS

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    3. Eugene F. Fama & Kenneth R. French, 2015. "Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 4, pages 79-102, World Scientific Publishing Co. Pte. Ltd..
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    6. Cartea, Álvaro & Villaplana, Pablo, 2008. "Spot price modeling and the valuation of electricity forward contracts: The role of demand and capacity," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2502-2519, December.
    7. Weron, Rafał & Zator, Michał, 2014. "Revisiting the relationship between spot and futures prices in the Nord Pool electricity market," Energy Economics, Elsevier, vol. 44(C), pages 178-190.
    8. Redl, Christian & Haas, Reinhard & Huber, Claus & Böhm, Bernhard, 2009. "Price formation in electricity forward markets and the relevance of systematic forecast errors," Energy Economics, Elsevier, vol. 31(3), pages 356-364, May.
    9. Hany A. Shawky & Achla Marathe & Christopher L. Barrett, 2003. "A first look at the empirical relation between spot and futures electricity prices in the United States," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 23(10), pages 931-955, October.
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    Cited by:

    1. David P. Brown & David E. M. Sappington, 2023. "Market Structure, Risk Preferences, and Forward Contracting Incentives," Journal of Industrial Economics, Wiley Blackwell, vol. 71(4), pages 1146-1202, December.

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