Electricity Price Modelling with a Regime Switching Volatility
We present a methodology to model electricity price dynamics by applying the interest rate theory toolkit. We construct the electricity market following  and applying the Heath, Jarrow and Morton () model. The electricity returns forward curve evolution using the Regime Switching Volatility is the instrument chosen to reflect into a simulating model the natural seasonality of electricity prices. The model calibration and the volatility parameters estimation allow to simulate in a realistic way the future electricity prices.
|Date of creation:||Jun 2010|
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