Energy trading flashcards overall

Which market uses a uniform clearing price?

Day-Ahead Auction

Which market operates under a pay-as-bid principle?

Intraday Continuous

main purpose of intraday trading?

correct forecast errors

the Day-Ahead market is mainly used to:

establish reference prices

a market clearing price is:

price where supply equals demand

a bid is:

offer to buy

an ask is:

offer to sell

best bid = 44; best ask = 45; spread ?

1

a crossed order book occurs when:

best ask < best bid

a small bid-ask spread indicates:

high liquidity

Mid-price formula?

(Bid + Ask)/2

Market depth measures:

Number of price-quantity levels

Generators are dispatched according to:

Marginal cost

The last plant needed to satisfy demand determines:

Clearing price

Increasing demand generally moves dispatch toward:

More expensive plants

Rising EUA prices increase:

Emission costs

Coal emits:

More CO₂ than gas

If EUA prices rise sharply, which technology becomes relatively more attractive?

Gas

Specific emissions are measured in:

tCO₂/MWh

Emission costs are included in:

Marginal costs

A long position profits when:

Prices rise

A short position profits when:

Prices fall

Main purpose of a forward contract?

Hedging

A hedge aims to:

Reduce risk

A power producer worried about falling prices should generally:

Sell forward

Buying at the ask and immediately selling at the bid generally causes:

Loss

The loss from immediately reversing a trade mainly comes from:

Spread

A narrow spread means:

Low transaction costs

VaR is mainly used to measure:

Market risk

Delta measures sensitivity to:

Underlying price

Vega measures sensitivity to:

Volatility

Gamma measures:

Second-order price sensitivity

Best Bid = 50

Best Ask = 51

Spread ?

1

Best Bid = 44

Best Ask = 46

Mid-price ?

45

Bought 50 €/MWh

Sold 49 €/MWh

Loss per MWh ?

1 €/MWh

Bought 44.75

Sold 44.35

Loss ?

0.40 €/MWh

31 days

25 MW

24 h/day

Volume ?

18,600 MWh

Loss = 0.40 €/MWh

Volume = 18,600 MWh

Total loss ?

7,440 €

Why do energy companies use derivatives?

To reduce price risk

Which market is mainly used for hedging?

Forward Market

Spot prices mainly reflect:

Short-term supply-demand balance

Forward prices mainly reflect:

Expectations about future prices

A forward contract is:

Bilateral agreement for future delivery

A future differs from a forward because it is generally:

Exchange traded

An option gives:

A right but not an obligation

A call option benefits from:

Rising prices

A put option benefits from:

Falling prices

Maximum loss for a call option buyer?

Premium paid

Maximum loss for a futures buyer?

Unlimited in theory

Delta measures sensitivity to:

Underlying price

Gamma measures:

Second derivative with respect to price

Vega measures sensitivity to:

Volatility

Which Greek is usually near zero for forwards?

Gamma

A portfolio of forwards generally has:

Gamma ≈ 0

Value-at-Risk estimates:

Potential loss

A 99% VaR of €10 million means:

Probability of larger loss is about 1%

Higher volatility generally increases:

Option value

Who naturally wants to hedge?

All of them

What does EUA stand for?

European Union Allowance

One EUA generally allows emission of:

1 ton CO₂

Main purpose of the EU ETS?

Reduce greenhouse gas emissions

Higher EUA prices encourage:

Cleaner generation

Which agreement succeeded Kyoto?

Paris Agreement

Kyoto Protocol mainly targeted:

Greenhouse gas reduction

The EU ETS is an example of:

Carbon pricing

What is EPEX mainly known for?

Day-ahead and intraday power trading

What is EEX mainly known for?

Futures and commodity trading

Baseload products deliver:

Constant power all hours

Peakload products typically cover:

Weekdays daytime hours

Electricity forward contracts are commonly traded as:

All of the above

OTC stands for:

Over-The-Counter

A Transmission System Operator is responsible for:

All of the above

Which activity is NOT performed by the TSO?

Dispatching power plants in a liberalised market