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Absolute yield
Denotes that the yield is not relative and does not follow a benchmark or an index.
Diversification effects
This is best described by an example. If the oil price rises the oil producers benefit, but it also means higher costs for companies such as airlines. There is a negative or at least a low correlation between these two industries. This in turn will have a diversification effect on a portfolio which contains both assets compared to a portfolio with just one asset. In this way it is possible to obtain a higher yield at a lower risk if the assets are diversified through different types of asset.
Financial electricity derivates
Derivatives are instruments which are based on an underlying instrument. Electricity derivatives are instruments whose price are determined by the electricity price.
Futures and forwards
With futures and forwards you buy or sell a contract today at a pre-determined price for future delivery. In the electricity market the difference between futures and forwards is that futures are settled on a daily basis and the profit or loss is realised the following day, whereas a forwards will accumulated the profit or loss during a trading period which is later divided into periods consisting of the number of days of delivery period. |
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