Calibration of the multifactor HJM model for energy market
The purpose of this paper is to show that using the toolkit of interest rate theory, already well known in financial engineering as the HJM model [D. Heath, R. Jarrow, A. Morton, Econometrica 60, 77 (1992)], it is possible to derive explicite option pricing formula and calibrate the theoretical model to the empirical electricity market. The analysis is illustrated by numerical cases from the European Energy Exchange (EEX) in Leipzig. The multi-factor versus one-factor HJM models are compared.
|Date of creation:||2005|
|Date of revision:|
|Publication status:||Published in Acta Physica Polonica B Vol. 37, No 5 (2006) 1455-1466.|
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Web page: http://prac.im.pwr.wroc.pl/~hugo
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