Abstract
The recent deregulation of electricity markets has led to the creation of energy exchanges, where the electricity is freely traded. In this paper, we study the most salient statistical features of electricity prices with a particular attention to the European energy exchanges. These features can be adequately reproduced by the sum-OU model: a model representing the price as a sum of Lévy-driven Ornstein-Uhlenbeck (OU) processes. We present a new method for filtering out the different OU components and develop a statistical procedure for estimating the sum-OU model from data.
| Original language | English |
|---|---|
| Pages (from-to) | 503-528 |
| Number of pages | 26 |
| Journal | International Journal of Theoretical and Applied Finance |
| Volume | 11 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - 1 Aug 2008 |
| Externally published | Yes |
Keywords
- Electricity prices
- Lévy-driven Ornstein-Uhlenbeck type processes
- Multi-factor models
- Nonlinear filtering
- Statistical estimation
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