Pricing electricity derivatives under alternative stochastic spot price models

Author

Deng, Shijie

Author_Institution

Sch. of Ind. & Syst. Eng., Georgia Inst. of Technol., Atlanta, GA, USA

fYear

2000

fDate

4-7 Jan. 2000

Abstract

The article proposes several mean-reversion jump-diffusion models to describe spot prices of electricity. It incorporates multiple jumps, regime-switching and stochastic volatility into these models in order to capture the salient features of electricity prices due to the physical characteristics of electricity. Prices of various electricity derivatives are derived under each model using the Fourier transform methods. The implications of modeling assumptions to electricity derivative pricing are also examined.

Keywords

Fourier transforms; costing; power system economics; power system simulation; stochastic processes; Fourier transform methods; alternative stochastic spot price models; electricity derivative pricing; electricity prices; mean-reversion jump-diffusion models; multiple jumps; physical characteristics; regime-switching; salient features; stochastic volatility; Costs; Fourier transforms; Power generation; Power generation economics; Power system economics; Pricing; Stochastic processes; Stochastic systems; Supply and demand; Systems engineering and theory;

fLanguage

English

Publisher

ieee

Conference_Titel

System Sciences, 2000. Proceedings of the 33rd Annual Hawaii International Conference on

Print_ISBN

0-7695-0493-0

Type

conf

DOI

10.1109/HICSS.2000.926755

Filename

926755