Electricity Market and Its Risk Management in Nigeria
Applied and Computational Mathematics
Volume 3, Issue 5, October 2014, Pages: 256-261
Received: Sep. 19, 2014; Accepted: Sep. 29, 2014; Published: Oct. 30, 2014
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Authors
Achudume Celestine, Department of Mathematics, University of Ibadan, Oyo State, Nigeria
Chukwuma Raphael Nwozo, Department of Mathematics, University of Ibadan, Oyo State, Nigeria
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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.
Keywords
Fourier Series, Electricity Market, Seasonality, Hedging Risk
To cite this article
Achudume Celestine, Chukwuma Raphael Nwozo, Electricity Market and Its Risk Management in Nigeria, Applied and Computational Mathematics. Vol. 3, No. 5, 2014, pp. 256-261. doi: 10.11648/j.acm.20140305.20
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