Abstract
The liberalization process of the power sector has led to competitive wholesale and retail markets. Market participants are exposed to risks associated with price volatility and uncertainties regarding production and consumption. This paper addresses these issues by analyzing and evaluating the role of contracts for difference (CFDs) as a financial product used to hedge against risk. The article presents several key features of software gents able to negotiate CFDs, paying special attention to risk management, notably risk attitude, and price negotiation. It starts with a contextualization of the subject, which is followed by the definition of a model to negotiate CFDs, involving several trading strategies and tactics. It starts with a contextualization of the subject, which is followed by the definition of a model to negotiate CFDs, involving a group of strategies to control the exposure of risk by software agents. Finally, a set of case studies is described to assess the performance of CFDs as a risk management tool and to compare their performance to forward bilateral contracts.
This work was performed under the project MAN-REM (FCOMP-01-0124-FEDER-020397), supported by both FEDER and National funds through the program “COMPETE\(-\)Programa Operacional Temático Factores de Competividade” and “FCT\(-\)Fundação para a Ciência e a Tecnologia”.
Access provided by Autonomous University of Puebla. Download to read the full chapter text
Chapter PDF
Similar content being viewed by others
Keywords
References
Hunt, S., Shuttleworth, G.: Competition and Choice in Electricity. Wiley, Chichester (1996)
Hausman, E., Hornby, R., Smith, A.: Bilateral Contracting in Deregulated Electricity Markets. Report to the American Public Power Association, Synapse Energy Economics (2008)
Bajpai, P., Singh, S.: Electricity trading in competitive power market: an overview and key issues. In: International Conference on Power Systems, Kathmandu (2004)
Paiva, J.: Redes de Energia Elétrica. IST Press, Lisboa (2007)
Lopes, F., Mamede, N., Novais, A.Q., Coelho, H.: A Negotiation Model for Autonomous Computational Agents: Formal Description and Empirical Evaluation. Journal of Intelligent & Fuzzy Systems 12(3), 195–212 (2002)
Lopes, F., Mamede, N., Novais, A.Q., Coelho, H.: Negotiation in a multi-agent supply chain system. In: Third Int. Workshop of the IFIP WG 5.7 Special Interest Group on Advanced Techniques in Production Planning & Control, pp. 153–168. Firenze University Press (2002)
Lopes, F., Mamede, N., Novais, A.Q., Coelho, H.: Negotiation among autonomous agents: experimental evaluation of integrative strategies. In: 12th Portuguese Conference on Artificial Intelligence, pp. 280–288. IEEE Computer Society Press (2005)
Lopes, F., Coelho, H.: Concession behaviour in automated negotiation. In: Buccafurri, F., Semeraro, G. (eds.) EC-Web 2010. LNBIP, vol. 61, pp. 184–194. Springer, Heidelberg (2010)
Lopes, F., Coelho, H.: Strategic and Tactical Behaviour in Automated Negotiation. International Journal of Artificial Intelligence 4(S10), 35–63 (2010)
Lopes, F., Coelho, H. (eds.): Negotiation and Argumentation in Multi-agent Systems. Bentham Science, The Netherlands (2014)
Kahneman, D., Tversky, A.: Prospect Theory: An Analysis of Decision Under Risk. Econometrica 47(2), 263–292 (1979)
von Neumann, J., Morgenstern, O.: Theory of Games and Economic Behavior. Princeton University Press (1953)
Varian, R.: Intermediate Microeconomics: A Modern Approach. W. W. Norton & Company, New York (2010)
Pratt, J.: Risk Aversion in the Small and in the Large. Econometrica 32(1/2), 122–136 (1964)
Faratin, P., Sierra, C., Jennings, N.: Negotiation Decision Functions for Autonomous Agents. Journal of Robotics and Autonomous Systems 24(3–4), 159–182 (1998)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2015 Springer International Publishing Switzerland
About this paper
Cite this paper
Sousa, F., Lopes, F., Santana, J. (2015). Contracts for Difference and Risk Management in Multi-agent Energy Markets. In: Demazeau, Y., Decker, K., Bajo Pérez, J., de la Prieta, F. (eds) Advances in Practical Applications of Agents, Multi-Agent Systems, and Sustainability: The PAAMS Collection. PAAMS 2015. Lecture Notes in Computer Science(), vol 9086. Springer, Cham. https://doi.org/10.1007/978-3-319-18944-4_13
Download citation
DOI: https://doi.org/10.1007/978-3-319-18944-4_13
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-18943-7
Online ISBN: 978-3-319-18944-4
eBook Packages: Computer ScienceComputer Science (R0)