Liquidity risks on power exchanges

Financial derivatives are important hedging tool for asset’s manager. Electricity is by its very nature the most volatile commodity, which creates big incentive to share the risk among the market participants through financial contracts. But, even if volume of derivatives contracts traded on Power Exchanges has been growing since the beginning of the restructuring of the sector, electricity markets continue to be considerably less liquid than other commodities. This paper tries to quantify the effect of this insufficient liquidity on power exchange, by introducing a pricing equilibrium model for power derivatives where agents can not hedge up to their desired level. Mathematically, the problem is a two stage stochastic Generalized Nash Equilibrium and its solution is not unique. Computing a large panel of solutions, we show how the risk premium and player’s profit are affected by the illiquidity.illiquidity, electricity, power exchange, artitrage, generalized Nash Equilibrium, equilibrium based model, coherent risk valuation

The valuation of power futures based on optimal dispatch

The pricing of contingent claims in the wholesale power market is a controversial topic. Important challenges come from the non-storability of electricity and the number of parameters that impact the market. We propose an equilibrium model based on the fundamentals of power generation. In a perfect competitive market, spot electricity prices are determined by the marginal cost of producing the last unit of power. Electricity can be viewed as a derivative of demand, fuels prices and carbon emission price. We extend the Pirrong-Jermakayan model such as to incorporate the main factors driving the marginal cost and the non-linearities of electricity prices with respect to fuels prices. As in the Pirrong-Jermakayan framework, any contingent claims on power must satisfy a high dimensional PDE that embeds a market price of risk, as load is not a traded asset. Analyzing the specificity of the marginal cost in power market, we simplify the problem for evaluating power futures so that it becomes computationally tractable. We test our model on the German EEX for "German Month Futures" with maturity of June and September 2008.power contingent claims, PDE valuation of financial derivatives, unit commitment, market price of risk, EEX

Ambiguous Aggregation of Expert Opinions: The Case of Optimal R&D Investment

How should a decision-maker allocate R&D funds when a group of experts provides divergent estimates on a technology's potential effectiveness? To address this question, we propose a simple decision-theoretic framework that takes into account ambiguity over the aggregation of expert opinion and a decision-maker's attitude towards it. In line with the paper's focus on R&D investment, decision variables in our model may affect experts' subjective probability distributions of the future potential of a technology. Using results from convex optimization, we are able to establish a number of analytical results including a closed-form expression of our model's value function, as well as a thorough investigation of its differentiability properties. We apply our framework to original data from a recent expert elicitation survey on solar technology. The analysis suggests that more aggressive investment in solar technology R&D is likely to yield significant dividends even, or rather especially, after taking ambiguous aggregation into account.Aggregation, Ambiguity, R&D, Expert Opinions, Convex/Conic Optimization

Gene duplicability of core genes is highly consistent across all angiosperms

Gene duplication is an important mechanism for adding to genomic novelty. Hence, which genes undergo duplication and are preserved following duplication is an important question. It has been observed that gene duplicability, or the ability of genes to be retained following duplication, is a nonrandom process, with certain genes being more amenable to survive duplication events than others. Primarily, gene essentiality and the type of duplication (small-scale versus large-scale) have been shown in different species to influence the (long-term) survival of novel genes. However, an overarching view of "gene duplicability" is lacking, mainly due to the fact that previous studies usually focused on individual species and did not account for the influence of genomic context and the time of duplication. Here, we present a large-scale study in which we investigated duplicate retention for 9178 gene families shared between 37 flowering plant species, referred to as angiosperm core gene families. For most gene families, we observe a strikingly consistent pattern of gene duplicability across species, with gene families being either primarily single-copy or multicopy in all species. An intermediate class contains gene families that are often retained in duplicate for periods extending to tens of millions of years after whole-genome duplication, but ultimately appear to be largely restored to singleton status, suggesting that these genes may be dosage balance sensitive. The distinction between single-copy and multicopy gene families is reflected in their functional annotation, with single-copy genes being mainly involved in the maintenance of genome stability and organelle function and multicopy genes in signaling, transport, and metabolism. The intermediate class was overrepresented in regulatory genes, further suggesting that these represent putative dosage-balance-sensitive genes