Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162227
Authors: 
Knaut, Andreas
Paschmann, Martin
Year of Publication: 
2017
Series/Report no.: 
EWI Working Paper 17/02
Abstract: 
Analyzing commodity market dynamics, we observe that price volatility increases with reduced contract duration. In this paper, we derive a theoretical model depicting the price formation in two markets with altering product granularity. Supplemented by empirical evidence from German electricity markets for hourly and quarter-hourly products, we find that the high price volatility is triggered by restricted participation of suppliers in the market for quarter-hourly products as well as by sub-hourly variations of renewable supply and demand. Welfare implications reveal efficiency losses of EUR 96 million in 2015 that may be reduced if markets are coupled.
Subjects: 
commodity markets
price volatility
sequential market organization
short-term market dynamics
electricity market interaction
short-term price formation
JEL: 
C13
C51
D44
D47
L94
Q21
Q41
Document Type: 
Working Paper

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