IDEAS home Printed from https://ideas.repec.org/a/ucp/jnlbus/v79y2006i3p1225-1262.html
   My bibliography  Save this article

Understanding the Fine Structure of Electricity Prices

Author

Listed:
  • Hélyette Geman

    (Birkbeck, University of London and ESSEC Business School)

  • Andrea Roncoroni

    (ESSEC Business School)

Abstract

This paper analyzes the special features of electricity spot prices derived from the physics of this commodity and from the economics of supply and demand in a market pool. Besides mean reversion, a property they share with other commodities, 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 the statistical properties of electricity pool prices. The quality of the fitting is illustrated on a database of major U.S. power markets.

Suggested Citation

  • Hélyette Geman & Andrea Roncoroni, 2006. "Understanding the Fine Structure of Electricity Prices," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1225-1262, May.
  • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:3:p:1225-1262
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/500675
    File Function: main text
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:79:y:2006:i:3:p:1225-1262. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: http://www.journals.uchicago.edu/JB/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.