Optimal trading policies for wind energy producer

DOI10.1137/16M1093069MaRDI QIDQ4635251zbMATH OpenOpenAlexFDO

Authors Zongjun Tan, Peter Tankov

Publication date 16 April 2018

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1610.04458

zbMATH Keywords

optimal tradingstochastic controlforecastswind energy

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Inference from stochastic processes and prediction (62M20) Environmental economics (natural resource models, harvesting, pollution, etc.) (91B76) Actuarial science and mathematical finance (91G99) Optimal stochastic control (93E20)

Abstract: We study the optimal trading policies for a wind energy producer who aims to sell the future production in the open forward, spot, intraday and adjustment markets, and who has access to imperfect dynamically updated forecasts of the future production. We construct a stochastic model for the forecast evolution and determine the optimal trading policies which are updated dynamically as new forecast information becomes available. Our results allow to quantify the expected future gain of the wind producer and to determine the economic value of the forecasts.

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Cites work

• A stochastic representation theorem with applications to optimization and obstacle problems.
• An example of indifference prices under exponential preferences
• An optimal trading problem in intraday electricity markets
• Asymptotic utility-based pricing and hedging for exponential utility
• Continuous-time stochastic control and optimization with financial applications
• Exponential Hedging and Entropic Penalties
• Hedging with temporary price impact
• Identifying the free boundary of a stochastic, irreversible investment problem via the Bank-El Karoui representation theorem
• Making and evaluating point forecasts

Cited in

(12)

• Price formation and optimal trading in intraday electricity markets
• A mean-field game model of price formation with price-dependent agent behavior
• Stochastic optimization with dynamic probabilistic forecasts
• Intraday power trading: toward an arms race in weather forecasting?
• Equilibrium price in intraday electricity markets
• Interval prediction algorithm and optimal scenario making model for wind power producers bidding strategy
• Optimal energy commitments with storage and intermittent supply
• Optimal hedging of prediction errors using prediction errors
• Optimal bidding strategies for wind power producers with meteorological forecasts
• Online decision making for trading wind energy
• A new approach to wind power futures pricing
• Price formation and optimal trading in intraday electricity markets

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