ElA Begins Reporting Monthly Price Volatility and Investigating Measures' Validity

摘要

It is often noted that energy prices are quite volatile, reflecting market participants' adjustments to new information from physical energy markets and/or markets in energy-related financial derivatives. Price volatility is an indication of the level of uncertainty, or risk, in the market. This article describes how markets price risk and how the market-clearing process for risk transfer can be used to generate "price bands" around observed futures prices for crude oil, natural gas, and other commodities. These bands provide a quantitative measure of uncertainty regarding the range in which markets expect prices to trade.