Modelling energy spot prices by Lévy semistationary processes
AbstractThis paper introduces a new modelling framework for energy spot prices based on Lévy semistationary processes. Lévy semistationary processes are special cases of the general class of ambit processes. We provide a detailed analysis of the probabilistic properties of such models and we show how they are able to capture many of the stylised facts observed in energy markets. Furthermore, we derive forward prices based on our spot price model. As it turns out, many of the classical spot models can be embedded into our novel modelling framework.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2010-18.
Date of creation: 27 Apr 2010
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Web page: http://www.econ.au.dk/afn/
Energy markets; forward price; Lévy semistationary process; stochastic integration; spot price;
Find related papers by JEL classification:
- C0 - Mathematical and Quantitative Methods - - General
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- G1 - Financial Economics - - General Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-08 (All new papers)
- NEP-ECM-2010-05-08 (Econometrics)
- NEP-ENE-2010-05-08 (Energy Economics)
- NEP-MIC-2010-05-08 (Microeconomics)
- NEP-ORE-2010-05-08 (Operations Research)
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