Forecasting advantage and trading-profit conversion

Determine how much an advantage in electricity-price forecasting translates into trading profit on the continuous intraday electricity market.

Background

The paper identifies a gap between probabilistic price forecasting and intraday trading-strategy design. Existing research commonly evaluates forecast quality and trading performance separately, leaving unresolved the extent to which improvements in forecasts generate economically meaningful profit when incorporated into a continuous intraday trading strategy. This question is relevant to assessing whether increasingly sophisticated forecasting models, including models using order-book microstructure information, provide practical value to market participants.

The issue is distinct from the paper’s own empirical comparison of forecasting models and trading outcomes: the broader relationship between forecasting improvements and profit conversion remains unclear beyond the specific strategies, data, and market setting evaluated in the study.