Reply To: Modelling Nordpool Power type contracts

#8908
Israr Ahmed
Keymaster

Just an additional note/clarification.

PWR-EXCH-FUT : A ‘standard’ power future usually has the Y/Q/M cascade happening at the FINAL EXPIRY SETTLEMENT PRICE of each of the Y/Q/M contracts. The total PnL will still be Deal Price M – Deal Price Y ( intermediates cancel out ) . So the final PnL is the combined PnL across all the Y/Q/M deals. To ensure this (1) The Comfut Fwd Fixing Script will fix from the m-curve if its type cascading and (2) the Cascade will happen at that fixed price.

PWR-EXCH-FWD : We can model ‘power swaps’ using these. For these crucial difference is that unlike the PWR-EXCH-FUT the full PnL stays on the active deal as the Y/Q/M cascade needs to happen at the DEAL PRICE. The PnL is not spread across the whole set of deals. Therefore the (1) fixing on the Y/Q don’t really matter as (1a) Cascade at Deal Price and (1b) There should be no PnL on the post cascaded parent deal (2) that’s why the m-value of the Y/Q need to be set to zero as otherwise there is double counting.

Download PDF version

This field is for validation purposes and should be left unchanged.