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Electricity Market and Its Risk Management in Nigeria

Received: 19 September 2014     Accepted: 29 September 2014     Published: 30 October 2014
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Abstract

This paper is on the development of adequate mathematical model of electricity price via Fourier series. Fourier series is the representation of a function f(x) as an infinite series in sine and cosine terms. Our choice of Fourier series model for electricity price is as result of its volatility, fluctuation trends of hydro flow and poor market designs and we use actively-traded natural gas to hedge against electricity price in Nigeria. The natural gas prices are volatile but do not have a clear seasonal pattern, thus eliminating natural gas price volatility through hedging substantially reduce the electricity price, this development of logical mathematical frame work in the form of hedging tools assures an investor of his or her safety in the power sector.

Published in Applied and Computational Mathematics (Volume 3, Issue 5)
DOI 10.11648/j.acm.20140305.20
Page(s) 256-261
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2014. Published by Science Publishing Group

Keywords

Fourier Series, Electricity Market, Seasonality, Hedging Risk

References
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[11] Ederington LH, Salas JM. 2008. Minimum variance hedging when spot price changes are partially predictable. Journal of Banking and finance 32:654-663.
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  • APA Style

    Achudume Celestine, Chukwuma Raphael Nwozo. (2014). Electricity Market and Its Risk Management in Nigeria. Applied and Computational Mathematics, 3(5), 256-261. https://doi.org/10.11648/j.acm.20140305.20

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    ACS Style

    Achudume Celestine; Chukwuma Raphael Nwozo. Electricity Market and Its Risk Management in Nigeria. Appl. Comput. Math. 2014, 3(5), 256-261. doi: 10.11648/j.acm.20140305.20

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    AMA Style

    Achudume Celestine, Chukwuma Raphael Nwozo. Electricity Market and Its Risk Management in Nigeria. Appl Comput Math. 2014;3(5):256-261. doi: 10.11648/j.acm.20140305.20

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  • @article{10.11648/j.acm.20140305.20,
      author = {Achudume Celestine and Chukwuma Raphael Nwozo},
      title = {Electricity Market and Its Risk Management in Nigeria},
      journal = {Applied and Computational Mathematics},
      volume = {3},
      number = {5},
      pages = {256-261},
      doi = {10.11648/j.acm.20140305.20},
      url = {https://doi.org/10.11648/j.acm.20140305.20},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.acm.20140305.20},
      abstract = {This paper is on the development of adequate mathematical model of electricity price via Fourier series. Fourier series is the representation of a function f(x)  as an infinite series in sine and cosine terms. Our choice of Fourier series model for electricity price is as result of its volatility, fluctuation trends of hydro flow and poor market designs and we use actively-traded natural gas to hedge against electricity price in Nigeria. The natural gas prices are volatile but do not have a clear seasonal pattern, thus eliminating natural gas price volatility through hedging substantially reduce the electricity price, this development of logical mathematical frame work in the form of hedging tools assures an investor of his or her safety in the power sector.},
     year = {2014}
    }
    

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    T1  - Electricity Market and Its Risk Management in Nigeria
    AU  - Achudume Celestine
    AU  - Chukwuma Raphael Nwozo
    Y1  - 2014/10/30
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    N1  - https://doi.org/10.11648/j.acm.20140305.20
    DO  - 10.11648/j.acm.20140305.20
    T2  - Applied and Computational Mathematics
    JF  - Applied and Computational Mathematics
    JO  - Applied and Computational Mathematics
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    PB  - Science Publishing Group
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    UR  - https://doi.org/10.11648/j.acm.20140305.20
    AB  - This paper is on the development of adequate mathematical model of electricity price via Fourier series. Fourier series is the representation of a function f(x)  as an infinite series in sine and cosine terms. Our choice of Fourier series model for electricity price is as result of its volatility, fluctuation trends of hydro flow and poor market designs and we use actively-traded natural gas to hedge against electricity price in Nigeria. The natural gas prices are volatile but do not have a clear seasonal pattern, thus eliminating natural gas price volatility through hedging substantially reduce the electricity price, this development of logical mathematical frame work in the form of hedging tools assures an investor of his or her safety in the power sector.
    VL  - 3
    IS  - 5
    ER  - 

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Author Information
  • Department of Mathematics, University of Ibadan, Oyo State, Nigeria

  • Department of Mathematics, University of Ibadan, Oyo State, Nigeria

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