Allowing financial trading in California’s wholesale electricity market significantly reduces volatility

Forward markets—over-the-counter marketplaces that set the price of a financial instrument or asset—are used to trade a variety of instruments, including securities and commodities. In a new study, researchers measured the extent to which forward prices and spot prices (the current market price at which a given asset can be bought or sold for immediate delivery) agreed in markets with transaction costs in California, studying time periods before and after…