2008•Economic ManagementRequires access
Inherent Risk of Operating Electricity Futures Market
Zhongqun Wu
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Abstract
The paper focuses on the inherent risk of electricity futures market.Firstly,the characteris- tic of risk of electricity market is analyzed and portrayed.Further,the paper mainly discusses and indicates the formation mechanism of risk of the electricity futures market and its causes.The results show that the electricity futures market cannot remove the market power of the generator,and under routine electricity transaction rules,the generator has the dominant strategy.The speculator will know that and leave the market after taking the games again and again.This will lead the market to collapse finally.This is a Nash—equilibrium.The paper furthers the conclusion of Moulton (2005),and provides a theoretical explana- tion for his empirical results.