How Does Pricing of Day-ahead Electricity Market Affect Put Option Pricing

Abstract

In this paper, impacts of day-ahead market pricing on behavior of producers and <br>consumers in option and day-ahead markets and on option pricing are studied. To this end, <br>two comprehensive equilibrium models for joint put option and day-ahead markets under <br>pay-as-bid and uniform pricing in day-ahead market are presented, respectively. Interaction <br>between put option and day-ahead markets, uncertainty in fuel price, day-ahead market <br>pricing, and elasticity of consumers to strike price, premium price, and day-ahead price are <br>taken into account in these models. By applying the presented models to a test system <br>impact of day-ahead market pricing on equilibrium of joint put option and day-ahead <br>markets are studied.