Internal transfer price optimisation for integrated energy firms

A framework that demonstrates optimal internal pricing will deviate from ‘arm’s length principle'

Internal transfer price optimisation for integrated energy firms
The focus of the model is to understand the impact of ITPs as incentive-setters

Internal transfer prices (ITPs) are widely used to transfer positions in commodities and, implicitly, the risks attached to those positions. In an energy company, these  transactions happen between divisions, such as the generation, sales and trading divisions.

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