This article refocuses attention on the potential efficiency gains from competitive wholesale power trading, which allows the diversification of demand risk. The greatest efficiency gains obtain when power demand is least correlated across markets and when there is substantial cross-sectional...

Spot power prices are volatile and since electricity cannot be economically stored, familiar arbitrage-based methods are not applicable for pricing power derivative contracts. This paper presents an equilibrium model implying that the forward power price is a downward biased predictor of the...

Electricity cannot be economically stored, leading to volatile spot prices and implying that standard cost-of-carry relations are not useful for pricing electricity forward contracts. We model spot and forward power markets, evaluating the demand for risk reduction and assessing equilibrium spot...

We survey empirical studies on the development and effects of increased computerization across equity, foreign exchange, derivatives, and fixed-income markets. While the changes in the trading process due to computerization in less liquid markets such as the corporate bond market have been...

We examine the behavior of call options surrounding the underlying stock's ex-dividend date. The evidence is inconsistent with the predictions of a rational exercise policy; a significant fraction of the open interest remains unexercised, resulting in a windfall gain to option writers. This...

In this article, I analyze a class of contest success functions (CSFs) that satisfy Luce's Choice Axiom. I show that the functional forms of these CSFs can be fully identified if they are characterized by a partial differential equation (PDE), which has several intuitive economic...