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Mean‐risk optimization of electricity portfolios
Author(s) -
Eichhorn Andreas,
GröweKuska Nicole,
Liebscher Andrea,
Römisch Werner,
Spangardt Gorden,
Wegner Isabel
Publication year - 2004
Publication title -
pamm
Language(s) - English
Resource type - Journals
ISSN - 1617-7061
DOI - 10.1002/pamm.200410001
Subject(s) - cvar , portfolio optimization , expected shortfall , weighting , mathematical optimization , portfolio , discretization , time horizon , electricity , stochastic optimization , optimization problem , value at risk , horizon , computer science , mathematics , risk management , economics , engineering , financial economics , finance , medicine , mathematical analysis , geometry , electrical engineering , radiology
Abstract We present a mathematical model with stochastic input data for mean‐risk optimization of electricity portfolios containing several physical components and energy derivative products. The model is designed for the optimization horizon of one year in hourly discretization. The aim consists in maximizing the mean book value of the portfolio at the end of the optimization horizon and, at the same time, in minimizing the risk of the portfolio decisions. The risk is measured by the conditional value‐at‐risk and by some multiperiod extension of CVaR, respectively.We present numerical results for a large‐scale realistic problem adapted to a municipal power utility and study the effects of varying weighting of risk. (© 2004 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)