
Understanding the Fine Structure of Electricity Prices
Geman, Hélyette; Roncoroni, Andréa (2006), Understanding the Fine Structure of Electricity Prices, The Journal of Business, 79, 3, p. 1225-1261. http://www.jstor.org/stable/10.1086/500675
Type
Article accepté pour publication ou publiéDate
2006-04Journal name
The Journal of BusinessVolume
79Number
3Publisher
University of Chicago Press
Pages
1225-1261
Publication identifier
Metadata
Show full item recordAbstract (EN)
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 US power markets.Subjects / Keywords
Energy price risk; Simulation; Calibration; Statistical estimations; Jump diffusions; Electricity pricesRelated items
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