RESEARCH INTERESTS
Energy economics, Industrial organization, Market microstructure
PUBLICATION
► An empirical analysis of the bid-ask spread in the German power continuous market. (2022) The Energy Journal
Abstract: A sufficient amount of liquidity is decisive for a well-functioning market. This paper gives a better understanding of the liquidity of the German power market using the bid-ask spread as proxy. Based on the order books for hourly contracts, I first describe the evolution of the bid-ask spread and the market depths over the trading session. Further, I show the «L-shaped» behavior of the bid-ask spread during the trading session. Second, I identify the main drivers of the bid-ask spread. I find a positive relation between risk and the bid-ask spread as well as a negative relation between the bid-ask spread and the needs for adjustment, the activity, and the competition in the market.
Keywords: bid-ask spread, market depths, continuous market, power market.
The working paper can be found here.
WORKING PAPERS
► Vertical integration, real-time pricing and market power. (2019)
Abstract: While the literature studies the question of real-time pricing from a demand perspective, this paper theoretically investigates it from the supply point of view. I use an oligopolistic model with a vertically integrated dominant firm whom proposes a real-time pricing scheme to its final consumers - i.e. supply power at the hourly price of the forward market. I find that vertical integration in sequential market reduces market power when the retail price to end-consumers is fixed. However, the result suggests that the real-time pricing scheme gives incentives to the dominant firm to exercise more market power and hence increases prices on both the forward and the spot markets.
Keywords: vertical integration, real-time pricing, market power, power market.
► Auction and continuous markets: rather complements than substitutes? The case of the German spot power market. (2019)
Abstract: A good market design is a key component of an efficient market. This paper quantifies the effect of the introduction of an auction before a continuous market in terms of liquidity, volatility and competition. Using order and trade books of the German quarter hourly contracts for power, I find that the introduction of the auction decreased the volume traded on the continuous market (business-stealing effect) while it increased the total volume (auction and continuous). This limited effect is due to the complementarity between the 2 trading mechanisms. Second, the introduction has no effect on the volatility during the first hour of trading and reduces it during the second hour of the session. Finally, after the introduction of the auction, the number of market participants more than doubled and the concentration of the market decreased on the trading chain (auction and continuous market). This research contributes to the literature by using order books in their finest details to assess the impact of the introduction of an auction in complement to a continuous market as well by monitoring the effect on the competition.
Keywords: auction, continuous market, power spot market.