Title of article :
A jump‑diffusion model for pricing electricity under price‑cap regulation
Author/Authors :
Kegnenlezom, M University of Yaounde 1 - Yaounde, Cameroon , Takam Soh, P University of Yaounde 1 - Yaounde, Cameroon , Mbele Bidima, M. L. D University of Yaounde 1 - Yaounde, Cameroon , Emvudu Wono, Y University of Yaounde 1 - Yaounde, Cameroon
Abstract :
In this paper, we derive a new jump-diffusion model for electricity spot price from the “Price-Cap” principle. Next, we show that the model has a non-classical mean-reverting linear drift. Moreover, using this model, we compute a new exact formula for the price of forward contract under an equivalent martingale measure and we compare it to Cartea et al. (Appl Math Finance 12(4):313–335, 2005) formula.
Keywords :
Model , Electricity market , Price-cap regulation , Spot price , Forward price
