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Analysis and Modelling of Electricity Futures Prices

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  • Borovkova Svetlana

    ()
    (Free University of Amsterdam and Delft University of Technology, The Netherlands)

  • Geman Helyette

    (Birkbeck, University of London)

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    Abstract

    We model electricity futures prices using a seasonal forward curve model, quantifying seasonalities by a deterministic seasonal forward premium. Stochastic features of the futures prices are contained in the stochastic forward premium: a quantity analogous to the well-known convenience yield. The model parameters are estimated from the historical data of IPE electricity futures prices and the spark spread, and electricity forward curves are deseasonalized to reveal their underlying stochastic structure. We apply principal component analysis to the deseasonalized forward curves and develop trading strategies using indicators based on these principal components.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

    Volume (Year): 10 (2006)
    Issue (Month): 3 (September)
    Pages: 1-16

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    Handle: RePEc:bpj:sndecm:v:10:y:2006:i:3:n:6

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    Web page: http://www.degruyter.com

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    Cited by:
    1. Demers, Jean-Guy, 2009. "Multiple zone power forwards: A value at risk framework," Energy Economics, Elsevier, Elsevier, vol. 31(5), pages 714-726, September.
    2. Alper Ozun & Erman Erbaykal, 2009. "Detecting risk transmission from futures to spot markets without data stationarity: Evidence from Turkey's markets," Journal of Risk Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 10(4), pages 365-376, August.

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