Analysis on pricing of optional electricity forward contracts

The deregulation of electric power industry has brought tremendous risk to market participants.As an important instrument for risk averse,forward contracts and future contracts,are gaining great attention in electricity market.In this paper,one kind of bilateral optional electricity forward contracts model for considering demand uncertainty was put forward.The calculation formula of price of forward contracts was given and the optimal strike price of options for seller and buyer were calculated.Finally,one simple example was employed to analyze the effects of correlation coefficient between spot price and demand,demand fluctuation and spot price fluctuation on forward price.The test results show that forward price will be greatly affected by demand fluctuation besides price fluctuation,which is coincident with the expected results.