Risk Modeling Of Contracts Trading In Electricity Market

In the competitive electricity market,contracts trading can be used as an effective tool for risk management and bilateral transaction. The basic categories and concepts of financial derivatives are firstly introduced,and the study on applications of forward contracts , future contracts and option contracts in the power market are carried out. Then a contract between independent power producers (IPP) and electric power company is considered. Decision-making model is developed for trading this contract before delivery. According the development strategy of North China Power System, build three different risk-models to suit requirements of different stage. By the method of maximize Utility function to presents bidding strategy coordination between contract market and spot market to distribute the generation capacity in order to get more profit for risk-take IPP. Eventually this paper proposes the model and analysis of a forward contract with bilateral options in electricity market. This contract enables both the seller and the buyer to take advantage of flexibility in generation and consumption to obtain a monetary benefit while simultaneously removing the risk of market price fluctuations. Theoretical model for pricing this type of forward contract is developed and analyzed.