A Class of Marked Point Processes for Modelling Electricity Prices
AbstractThis paper presents a family of processes to model electricity spot prices in deregulated markets. Besides mean-reversion, a property they share with other comodities, power prices exhibit the unique feature of spikes in trajectories. We introduce a class of discontinuous processes exhibiting a « jump-reversion » component to properly represent these sharp upward moves shortly followed by drops of similar magnitude. Our approach allows to capture – for the first time to our knowledge – both the trajectorial and statistical properties of electricity pool prices. The quality of the fitting is illustrated on a database of major US power markets.
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Bibliographic InfoPaper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 03004.
Length: 69 pages
Date of creation: Mar 2003
Date of revision:
electricity prices; deregulated market; price risk; statistical models; US power markets;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-30 (All new papers)
- NEP-COM-2003-11-30 (Industrial Competition)
- NEP-RMG-2003-11-30 (Risk Management)
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