Basic Equilibrium formula & Non storability
AIM: Derive the basic equilibrium formula for pricing commodity forwards and futures
The forward price is equal to the expected spot price in the future, but discounted to the present.
Non storability
AIM: Explain the effect non‐storability has on electricity prices
Because electricity cannot (mostly) be stored, the forward market provides “invaluable price discovery.” Price changes largely reflect “[consensus] changes in the expected future spot price.
|
The forward price is equal to the expected spot price in the future, but discounted to the present.
Non storability
AIM: Explain the effect non‐storability has on electricity prices
Because electricity cannot (mostly) be stored, the forward market provides “invaluable price discovery.” Price changes largely reflect “[consensus] changes in the expected future spot price.
|
Posts
Post a Comment