Optimal bidding in hourly and quarter-hourly electricity price auctions: trading large volumes of power with market impact and transaction costs
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| Format: | Preprint |
| Publié: |
2021
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| _version_ | 1866914278318014464 |
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| author | Narajewski, Michał Ziel, Florian |
| author_facet | Narajewski, Michał Ziel, Florian |
| contents | This paper addresses the question of how much to bid to maximize the profit when trading in two electricity markets: the hourly Day-Ahead Auction and the quarter-hourly Intraday Auction. For optimal coordinated bidding many price scenarios are examined, the own non-linear market impact is estimated by considering empirical supply and demand curves, and a number of trading strategies is used. Additionally, we provide theoretical results for risk neutral agents. The application study is conducted using the German market data, but the presented methods can be easily utilized with other two consecutive auctions. This paper contributes to the existing literature by evaluating the costs of electricity trading, i.e. the price impact and the transaction costs. The empirical results for the German EPEX market show that it is far more profitable to minimize the price impact rather than maximize the arbitrage. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2104_14204 |
| institution | arXiv |
| publishDate | 2021 |
| record_format | arxiv |
| spellingShingle | Optimal bidding in hourly and quarter-hourly electricity price auctions: trading large volumes of power with market impact and transaction costs Narajewski, Michał Ziel, Florian Statistical Finance Mathematical Finance Portfolio Management Trading and Market Microstructure Applications This paper addresses the question of how much to bid to maximize the profit when trading in two electricity markets: the hourly Day-Ahead Auction and the quarter-hourly Intraday Auction. For optimal coordinated bidding many price scenarios are examined, the own non-linear market impact is estimated by considering empirical supply and demand curves, and a number of trading strategies is used. Additionally, we provide theoretical results for risk neutral agents. The application study is conducted using the German market data, but the presented methods can be easily utilized with other two consecutive auctions. This paper contributes to the existing literature by evaluating the costs of electricity trading, i.e. the price impact and the transaction costs. The empirical results for the German EPEX market show that it is far more profitable to minimize the price impact rather than maximize the arbitrage. |
| title | Optimal bidding in hourly and quarter-hourly electricity price auctions: trading large volumes of power with market impact and transaction costs |
| topic | Statistical Finance Mathematical Finance Portfolio Management Trading and Market Microstructure Applications |
| url | https://arxiv.org/abs/2104.14204 |