As the deregulation of electric business proceeds, each company needs to construct a risk hedging system, which the company has not been taking much care so far. In the electric business, the system risk should be treated more carefully because it may bring terrible financial loss to a generation company. In this paper, we address the system risk hedging issue. First, we introduce definitions for the system risk, then we discuss two typical hedging methodologies, insurance and catastrophe option. Finally, we suggest the optimal strategy, which includes risk-controlling operation.
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