Title :
Pricing electricity derivatives under alternative stochastic spot price models
Author_Institution :
Sch. of Ind. & Syst. Eng., Georgia Inst. of Technol., Atlanta, GA, USA
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;
Conference_Titel :
System Sciences, 2000. Proceedings of the 33rd Annual Hawaii International Conference on
Print_ISBN :
0-7695-0493-0
DOI :
10.1109/HICSS.2000.926755
