Journal of Energy Markets

Intra-day risk premia in European electricity forward markets

Ehud I. Ronn, Jens Wimschulte


Using a detailed data set of electricity forward prices in central Europe, we compute the intra-day risk premium and market price of risk for the European Energy Exchange and Energy Exchange Austria. Given the significant volatility and jump risk of electricity prices, these closely linked markets offer an opportunity to study market participants' willingness to pay a premium to secure day-ahead delivery prices earlier in a trading day. Generally, we find a positive risk premium, leading to a statistically significant negative market price of risk, and the implication that forward prices are upward-biased predictors of expected electricity spot prices.


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