RISK ANALYSIS FOR AN INDUSTRIAL COMPANY IN THE SPANISH ELECTRICAL MARKET

Abstract

The deregulation of the electricity market, the appearance of competence and new risks, has made to emerge in the electricity sector a new activity as it can be the trading. This new activity is due to the necessity to ensure a supply price and transfer the risks to the speculators of the market. Also, it has been introduced more competence in the retail market and the companies integrated vertically have been fractionated. Whether we compare the electric markets with the traditional financial markets, the latters are less complicated and more mature, considering that the electric power has a more complex behavior in relation to the transmission, meteorology, market coupling and stocking. Thus, the final objective of this work is to analyze and quantify the risk that a big industrial company assumes when negotiating with electricity prices, and in this way, enhance the industrial companies the decision-making for getting a profit adjusted to the risk (RORAC). For that, different tools are going to be used, such as the Montecarlo method, the VaR and the Black-Scholes equation. The losses that can be obtained have been calculated when you make a hedge by a futures portfolio or and an options portfolio, and it has been decided which one is more adequate taking into account the economic loss and the quantity of energy that can be hedged.