Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

This study suggests a complex procurement hedge model for the domestic generation company that simultaneously considers the risk factors of coal price and ocean freight rate. In addition, it analyses the superiority of the complex hedge model compared to the conventional one in terms of procurement return stabilization. According to the ex-post and the ex-ante empirical results, a separate hedge could stabilize the return flow, but the complex hedge would give a better result in terms of hedging effectiveness. Thus, one could improve hedging effects by fully considering the inherent variance-covariance relationship between coal price and ocean freight rate.