Lesson 12 Activities

Risk Management in the Electricity Market Activity

Part A

Assume the following values:

• Q = F = M = 100 MWh
• the strike price of the CFD is $60/MWh.
• LMP_a = $40/MWh
• LMP_b = $75/MWh

Calculate the numbers in Table 2.
Explain about this hedge. Is this a perfect hedge?

Part B

Assume the following values:

• Q = 100 MWh
• F = 90 MWh
• M = 80 MWh
• The strike price of the CFD is $60/MWh.
• LMP_a = $40/MWh
• LMP_b = $55/MWh
• Calculate the numbers in Table 2.
• Explain about this hedge. Is this a perfect hedge?

Grading Criteria

This activity is worth up to 20 points on the EBF 301 grading scale. Each part is worth up to 10 possible points.

Fundamental Factors

The Fundamental Factors activity is due as usual this week, at 11:59 pm on Sunday, and is worth 30 points on the EBF 301 grading scale. Please refer to the Fundamental Factors Instructions for additional information and grading rubric.

Quiz

Return to Canvas to complete the L12 Quiz.