A critical empirical study of three electricity spot price models

2012

We conduct an empirical analysis of three recently proposed and widely used models for electricity spot price process. The first model, called the jump-diffusion model, was proposed by Cartea and Figueroa (2005), and is a one-factor mean-reversion jump-diffusion model, adjusted to incorporate the most important characteristics of electricity prices. The second model, called the threshold model, was proposed by Roncoroni (2002) and further developed by Geman and Roncoroni (2006), and is an exponential Ornstein–Uhlenbeck process driven by a Brownian motion and a state-dependent compound Poisson process. It is designed to capture both statistical and pathwise properties of electricity spot pri…