A Decision Support System for Hedge Transactions in Electrical Energy Commercialization

Agents in the electricity sector may find themselves in a short position in the market at times. In this case, they have the option of hedging their risk by contracting part or all of their position through fixed-price forward contracts. If the hedge is only partial, the non-contracted portion must be settled at an uncertain future spot price, which exposes the agent to price risk. On the other hand, while a full hedge eliminates the risk, it eliminates potential gains. This Python code proposes an optimization model that maximizes the agent´s returns subject to a CVaR risk preference function to support the hedging decision.