(587h) Towards a Novel Energy Financial Security: The Texas ? & ? Energy Spot Price Index
AIChE Annual Meeting
Wednesday, November 13, 2019 - 4:54pm to 5:06pm
The energy landscape of the U.S. is carefully depicted to determine the products that are directed to the end-use sectors of the U.S. economy [1-5]. The total energy demand of these products, together with their spot prices in the market, serve as the backbone of the Energy Spot Price Index. Since the weights of the Energy Spot Price Index constituents have a lag between two and three months, we introduce a rolling horizon based parameter estimation model to determine the current weights. The spot prices of the products are taken from Bloomberg when available. For products whose spot prices are not available, we introduce and examine three different approaches [6-8]. The methodology is illustrated on 120 months to show the capability of accurately determining the value of the Energy Spot Price Index. The proposed Energy Spot Price Index is the first of its kind that precisely quantifies the average market price of energy. As such, it can be utilized as an efficient tool for all investors who look for exposure over the average market price of energy, trading over the whole energy market, hedging their investments, as well as a benchmark for measuring the overall cost of energy. Therefore, the Energy Spot Price Index can be used as a tradable financial security (e.g. ETF) that is updated daily providing an alternative for the investors who look to diversify their portfolios.
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