Optimal trading policies for wind energy producer

DOI10.1137/16M1093069zbMATH Open1408.91246arXiv1610.04458OpenAlexW2951146772MaRDI QIDQ4635251FDOQ4635251

Authors: Zongjun Tan, Peter Tankov 

Publication date: 16 April 2018

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

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.

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

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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)

Cites Work

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

Cited In (9)

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

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