Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/74204
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- Title
- Spot and derivative pricing in the EEX power market
- Related
- Journal of banking and finance, Vol. 31, Issue 11, p.3462-3485
- DOI
- 10.1016/j.jbankfin.2007.04.011
- Publisher
- Elsevier
- Date
- 2007
- FoR/RFCD Code(s)
-
010200 Applied Mathematics
150200 Banking, Finance and Investment
- Author/Creator
- Bierbrauer, Michael
- Author/Creator
- Menn, Christian
- Author/Creator
- Rachev, Svetlozar T
- Author/Creator
- Trück, Stefan
- Description
- Using spot and futures price data from the German EEX Power market, we test the adequacy of various one-factor and two-factor models for electricity spot prices. The models are compared along two different dimensions: (1) We assess their ability to explain the major data characteristics and (2) the forecasting accuracy for expected future spot prices is analyzed. We find that the regime-switching models clearly outperform its competitors in almost all respects. The best results are obtained using a two-regime model with a Gaussian distribution in the spike regime. Furthermore, for short and medium-term periods our results underpin the frequently stated hypothesis that electricity futures quotes are consistently greater than the expected future spot, a situation which is denoted as contango.
- Description
- 24 page(s)
- Subject Keyword
- 010200 Applied Mathematics
- Subject Keyword
- 150200 Banking, Finance and Investment
- Subject Keyword
- power markets
- Subject Keyword
- spot price modeling
- Subject Keyword
- regime-switching models
- Subject Keyword
- forward premium
- Resource Type
- journal article
- Organisation
- Macquarie University. Dept. of Economics
- Identifier
- http://hdl.handle.net/1959.14/74204
- Identifier
- ISSN:0378-4266
- Identifier
- mq-rm-2007008337
- Language
- eng
- Reviewed
