Cross-border forward markets
Client: TSOs
Neon team: Ingmar Schlecht, Anselm Eicke
Published: 2024
European TSOs are required to issue long-term transmission rights (LTTRs) — financial derivatives on the spread between two bidding zones’ spot prices. ACER has proposed numerous changes, including a switch from spread options to spread futures and a virtual trading hub. In a report for the German TSOs, we developed an analytical framework for cross-border forward markets, showing that issuing LTTRs always means taking positions in domestic forward markets, and that a switch to futures would require TSOs to engage in delta hedging with volumes based on expected trade rather than transmission capacity.
Prof. Dr. Lion Hirth
hirth@neon.energy
+49 157 55 199 715
