Oliver Woll, 10.12.2009
Donnerstag 10. Dezember, 15:00, Raum 062
Oliver Woll (University of Duisburg-Essen)
Topic: Portfolio optimalization in electricity trading with limited liquidity (joint with
Christoph Weber)
Abstract:
In principle, portfolio optimization in electricity markets can make use of the standard mean-variance model going back to Markowitz. Yet a key restriction in most electricity markets is the limited liquidity. Therefore the standard model has to be adapted to cope with limited liquidity. An application of this model shows that the optimal hedging strategy for generation portfolios is strongly dependent on the size of the portfolio considered as well as on the variance-covariancematrix used and the liquidity function assumed. At first sight the approach looks rather similar to conventional optimization approaches for stock portfolios, yet the outcomes clearly illustrate that devising an optimal hedging strategy in future markets with limited liquidity is different from optimising the risk-return trade-off in conventional asset portfolios. One key difference is that the size of the portfolio matters.
