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Handika, Rangga

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  • Paper Title: Analysing the Relationship between Spot and Futures Prices in Australian Electricity Markets
  • Department Affiliation: Applied Finance and Actuarial Studies
  • Supervisor's Names:
    •  Associate Professor Stefan Trueck


This paper is intended to thoroughly investigate futures premiums in Australian electricity markets.   


This paper is the first comprehensive study to investigate futures premiums in Australian electricity markets.

Key literature / theoretical perspective: 

Due to the non-storability of electricity and the extremely volatile behaviour of electricity spot prices, market participants hedge their risks by buying or selling electricity in the forward market.  The ex-post futures premium as the relationship between quoted futures and realized spot prices provides important information on the risk-aversion of market participants.  


We examine the magnitude of futures premiums at different time instances. We relate the observed futures premiums to the behaviour of electricity spot prices. 


We find economically and statistically significant positive ex-post futures premium for futures contracts. We find that the bias in the futures price increases (decreases) when the last period average spot price increases (decreases).    

Research limitations/implications:

Dynamics and the dependence structure between the observed risk premiums should be analysed more deeply. 

Practical and Social implications:

  • Buyers and retailers of electricity are risk averse.
  • Risk premiums are significantly related across regional markets.  


Electricity Markets, Spot and Futures Prices, Risk Premium, Australian Regional Markets