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Can the Heston Model Forecast Energy Generation? A Systematic Literature Review

Author

Listed:
  • Bianca Reichert

    (Post-Graduation Program in Industrial Engineering, Federal University of Santa Maria, Santa Maria, Brazil,)

  • Adriano Mendon a Souza

    (Department of Statistics, Federal University of Santa Maria, Santa Maria, Brazil.)

Abstract

The ability to predict the price of stock exchange assets has attracted the attention of economists and physicists around the world, as physical models are useful to predict volatility behaviors. Knowing that volatility is crucial for energy sector planning, the research aim was to investigate whether the Heston pricing model is useful to predict energy generation, trough the steps established by the systematic review protocol. In a corpus of 25 documents, it was possible to identify: Lots of financial studies, energy and demography researches; a low level of interaction among universities; the largest number of publications from Australia and China; the most important journal; and the advantages of applying Econophysics models to solve volatility problems. In conclusion, the Heston model can be applied to predict energy generation, since it is a closed-form model and capable of modeling the stochastic volatility, reversing it to the predicted value of average energy generation.

Suggested Citation

  • Bianca Reichert & Adriano Mendon a Souza, 2022. "Can the Heston Model Forecast Energy Generation? A Systematic Literature Review," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 289-295.
    • Handle: RePEc:eco:journ2:2022-01-36
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    References listed on IDEAS

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    More about this item

    Keywords

    Electricity; Stock Exchange; Stochastic Volatility; Systematic Review;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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