Pricing in Electricity Markets: A Mean Reverting Jump Diffusion Model with Seasonality
Authors:
lvaro Cartea a;
Marcelo G. Figueroa a
lvaro Cartea a;
Marcelo G. Figueroa a
| Affiliation: | a Birkbeck College, University of London, London WC1E 7HX, UK, |
DOI:
10.1080/13504860500117503
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6 issues per year
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Abstract
This paper presents a mean-reverting jump diffusion model for the electricity spot price and derives the corresponding forward price in closed-form. Based on historical spot data and forward data from England and Wales the model is calibrated and months, quarters, and seasons-ahead forward surfaces are presented.
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| Keywords: Energy derivatives; electricity; forward curve; forward surfaces |
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