A Coherent Spot/Forward Price Model with Regime-Switching
ISBN
978-3-540-69994-1
Type
book section
Date Issued
2007
Author(s)
Bloechlinger, Lea
Editor(s)
Waldmann, Karl-Heinz
Stocker, Ulrike M.
Abstract
The challenge in modelling electricity prices is mainly caused by it’s non-storability. Spot prices are thus determined by the current demand/supply interaction, but hardly by expectations about the future. They show characteristics as mean-reversion, seasonal patterns, an immense volatility and spikes, which cannot be captured with standard stock market models. On contrary, there exists growing markets, where financial futures contracts are traded. These contracts are storable and show similar characteristics to other financial assets. In particular they feature a significant lower volatility then spot prices. Moreover, the volatility is decreasing in the time to maturity.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Book title
Operations Research Proceedings 2006 : selected papers of the Annual International Conference of the German Operations Research Society (GOR), Karlsruhe, September 6-8, 2006
Publisher
Springer
Publisher place
Berlin
Start page
271
End page
278
Pages
10
Subject(s)
Division(s)
Eprints ID
44429