Modelling energy forward prices
AbstractThe main purpose of the paper is to present, how derivatives valuing methodology, known from financial and commodities markets, can be applied to the electricity market. We compare an application of three recent models. We start with the convenience yield approach, then we analyse the application of the interest rates methodology, proposed by Hinz et al. (2005). Finally, the last approach built by Bjerksund et al (2000) on direct modelling of the forward price dynamics is discussed. We also calibrate the theoretical models to the Nord Pool market data. The empirical analysis shows how these models can be used for evaluation of options prices. Moreover, data study gives an evidence of the seasonal term structure of the returns variance.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Hugo Steinhaus Center, Wroclaw University of Technology in its series HSC Research Reports with number HSC/08/03.
Length: 8 pages
Date of creation: 2008
Date of revision:
Publication status: Published in the Proceedings of EEM08 (doi:10.1109/EEM.2008.4579020).
Forward contracts; Nord Pool financial market; Options valuation; Volatility modelling;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rafal Weron).
If references are entirely missing, you can add them using this form.