Related papers: A structural Heath-Jarrow-Morton framework for con…
We propose a new structural model that can compute the electricity spot and forward prices in two coupled markets with limited interconnection and multiple fuels. We choose a structural approach in order to represent some key…
We introduce a new and highly tractable structural model for spot and derivative prices in electricity markets. Using a stochastic model of the bid stack, we translate the demand for power and the prices of generating fuels into electricity…
In this article we discuss the application of the Heath-Jarrow-Morton framework Heath et al. [26] to energy markets. The goal of the article is to give a detailed overview of the topic, focusing on practical aspects rather than on theory,…
We provide a general HJM framework for forward contracts written on abstract market indices with arbitrary fixing and payment adjustments, and featuring collateralization in any currency denominations. In view of this, we first provide a…
One of the peculiarities of power and gas markets is the delivery mechanism of forward contracts. The seller of a futures contract commits to deliver, say, power, over a certain period, while the classical forward is a financial agreement…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of…
We develop a unified framework for modeling multiple term structures arising in financial, insurance, and energy markets, adopting an extended Heath-Jarrow-Morton (HJM) approach under the real-world probability. We study market viability…
The increasing interest in demand-side management (DSM) as part of the energy cost optimization calls for effective methods to determine representative electricity prices for energy optimization and scheduling investigations. We propose a…
In energy markets, joint historical and implied calibration is of paramount importance for practitioners, yet notoriously challenging due to the need to align historical correlations of futures contracts with implied volatility smiles from…
We price European-style options written on forward contracts in a commodity market, which we model with an infinite-dimensional Heath-Jarrow-Morton (HJM) approach. For this purpose we introduce a new class of state-dependent volatility…
We present a new model for the electricity spot price dynamics, which is able to capture seasonality, low-frequency dynamics and the extreme spikes in the market. Instead of the usual purely deterministic trend we introduce a non-stationary…
Overnight rates, such as the SOFR (Secured Overnight Financing Rate) in the US, are central to the current reform of interest rate benchmarks. A striking feature of overnight rates is the presence of jumps and spikes occurring at…
Classical time series models have serious difficulties in modeling and forecasting the enormous fluctuations of electricity spot prices. Markov regime switch models belong to the most often used models in the electricity literature. These…
There are several approaches to modeling and forecasting time series as applied to prices of commodities and financial assets. One of the approaches is to model the price as a non-stationary time series process with heteroscedastic…
A new test of a wide class of interest rate models is proposed and applied to a recently developed quantum field theoretic model and the industry standard Heath-Jarrow-Morton model. This test is independent of the volatility function unlike…
We propose and investigate two model classes for forward power price dynamics, based on continuous branching processes with immigration, and on Hawkes processes with exponential kernel, respectively. The models proposed exhibit jumps…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…
In this paper we present a regression based model for day-ahead electricity spot prices. We estimate the considered linear regression model by the lasso estimation method. The lasso approach allows for many possible parameters in the model,…
We propose a new estimator for the spot covariance matrix of a multi-dimensional continuous semi-martingale log asset price process which is subject to noise and non-synchronous observations. The estimator is constructed based on a local…
The accurate prediction of short-term electricity prices is vital for effective trading strategies, power plant scheduling, profit maximisation and efficient system operation. However, uncertainties in supply and demand make such…