Journal of Energy Markets

The papers included in this issue of The Journal of Energy Markets are all related to the theme of financial management and seek to present newresearch on the theory and modern practice of modeling, risk management, asset pricing and energy management. Aspects of electricity markets, carbon emissions forecasting and risk evaluation in renewables are particularly topical and feature strongly within these papers.

In the first paper, Antti Klemola and Jukka Sihvonen deal with the performance of popular option strategies in the Nordic power derivatives market. They conclude that protective put strategies outperform long forward and covered call strategies on a risk-adjusted basis, and they attribute this to the payoff function of the protective put seeming to fit the market dynamics and time-varying conditions well.

In contrast, in the issue's second paper, Emmanuel Senyo Fianu and Luigi Grossi employ an innovative modeling process with fat-tailed distributions to estimate risk measures on electricity markets. They manage to capture and comment on the extreme events of both the lower and upper tails of the distribution curves they use, and they analyze the different perspectives of regulators and investors in the energy market.

In our third paper, G. Atsalakis, D. Frantzis and C. Zopounidis focus on carbon emissions price forecasting, using an adaptive neuro-fuzzy inference system (ANFIS) and historical data to train and evaluate their model. ANFIS is a hybrid methodology combining neural networks and fuzzy logic to estimate the optimal carbon price forecast parameters. The authors show that their methodological approach is suitable for forecasting the price trend in carbon emissions.

Risk evaluation in a stochastic system is always an intriguing subject, and renewables present a highly relevant context from an energy systems point of view. The fourth paper in this issue, by Petros Katsoulis, Nikolaos S. Thomaidis and Jan Jantzen, employs various scenario analyses to assess the risk inherent in wind turbine investments in order to determine the selling price of generated power. The results highlight important aspects of the risk profile of the specified projects, which could provide the basis for the development of a general methodology of risk assessment, if supplemented with models measuring production uncertainty.

In our fifth paper, James L. Smith, Rex Thompson and Thomas K. Lee argue that fundamental determinants of speculative futures trading may have been misinterpreted by some as "excessive" speculation in the energy markets in recent years. Thus, using a rational expectations approach, they show why and how beliefs, as well as the volume of speculative futures trading, may rationally vary across commodities and through time. The paper also demonstrates that passive investors magnify equilibrium differences in beliefs and expand the scope for financial speculation, even though the authors do not draw any conclusions on this themselves.

Risk-collateral channels and how they affect loan management is the topic of our final paper, by Dimitris Gavalas and Theodore Syriopoulos. The authors conduct two sets of empirical tests delineated by loan risk premiums and ex post nonperformance in order to investigate the form of the empirical relationship between loan risk and collateral. Evidence is found to support the hypothesis that, for collateral overall, the "lender selection" channel is an important route for collateral pledges and the "loss mitigation" channel is the main determinant of risk premiums, with the former dominating the "borrower selection" and "risk shifting" channels.

The diverse papers included in this issue not only offer new insights into a number of issues but also provide various leads for further interesting research.All of these papers have benefited from the work of referees and from comments from participants at the 53rd Meeting of the EuroWorking Group on Commodities and Financial Modelling (EWGCFM) and the 2nd International Conference of the Research Centre for Energy Management (RCEM), which took place on May 22-24, 2014 in Chania, Crete. This research event was organized by the Technical University of Crete, in collaboration with the RCEM at the ESCP Europe Business School, under the auspices of the EWGCFM.

Kostas Andriosopoulos
Research Centre for Energy Management,
ESCP Europe Business School, London

Spiros Papaefthimiou
School of Production Engineering and Management,
Technical University of Crete

Constantin Zopounidis
Audencia Group, Nantes School of Management