Delta hedging the load-serving deal
In this article Andrew Klingler takes a closer look at the residual risk when a load-serving contract is hedged with forwards. The residual risk components are described quantitatively and a formula for the minimum variance hedge is outlined
As spark spreads narrow or disappear around the US, and proprietary trading loses its luster at many energy companies, structured transactions - especially 'full requirements' load-serving deals - are necessarily picking up the slack when it comes to marketing a company's long positions in electricity. Full requirements deals are contracts in which one party, typically an owner or manager of generating assets, agrees to provide all of its counterparty's electricity needs...
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