Energy power forward prices. Are forward prices rationally determined by agents in the Colombian market?

Authors

  • Gloria Stella Salazar Marín MSc. en Ingeniería Financiera, Universidad EAFIT. Vinculada a XM Expertos en Mercados.
  • Javier Pantoja PhD. en Administración, HEC - EAFIT. Profesor de tiempo completo, Universidad EAFI

Keywords:

Forward Contracts, Risk Premium, Regulated Market, Non-regulated Market.

Abstract

This article considers fixed-terms transactions made by agents, in diverse segments of the Colombian energy power market, using forward contracts in order to secure buying/selling prices. The random behavior of prices and quantities, which is handled in the energy power flux, implies the sacrifice of agents according to the transaction segment (regulated, non-regulated or intermediary). In addition to this, the premium, which is paid in the commercial exchange with forwards, is defined by the agents’ expectations and is a reflection of their risk aversion level. This involves financial rationality in the establishment of the premium in order to secure a price on uncertain energy power quantity in the future. Thus, the measurement of such expectation becomes useful, as it is defined by the type of market in which the transaction is being made.

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Published

2011-06-05

Issue

No. 18 (2011)

Section

Research Articles

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How to Cite

Salazar Marín, G. S., & Pantoja, J. (2011). Energy power forward prices. Are forward prices rationally determined by agents in the Colombian market? AD-Minister, 18, 77-99. https://publicaciones.eafit.edu.co/index.php/administer/article/view/815