6533b854fe1ef96bd12ae1bf
RESEARCH PRODUCT
Futures pricing in electricity markets based on stable CARMA spot models
Claudia KlüppelbergFred Espen BenthGernot MüllerLinda VosLinda Vossubject
FOS: Computer and information sciencesEconomics and EconometricsElectricity spot pricebusiness.industryEstimation theoryRisk premium60G52 62M10 91B84 (Primary) 60G10 60G51 91B70 (Secondary)Lévy processStatistics - ApplicationsCARMA model electricity spot prices electricity forward prices continuous time linear model Lévy process stable CARMA process risk premium robust filterddc:MicroeconomicsFOS: Economics and businessGeneral EnergyBase load power plantPeak loadEconometricsEconomicsApplications (stat.AP)ElectricityPricing of Securities (q-fin.PR)businessFutures contractQuantitative Finance - Pricing of Securitiesdescription
We present a new model for the electricity spot price dynamics, which is able to capture seasonality, low-frequency dynamics and the extreme spikes in the market. Instead of the usual purely deterministic trend we introduce a non-stationary independent increments process for the low-frequency dynamics, and model the large uctuations by a non-Gaussian stable CARMA process. The model allows for analytic futures prices, and we apply these to model and estimate the whole market consistently. Besides standard parameter estimation, an estimation procedure is suggested, where we t the non-stationary trend using futures data with long time until delivery, and a robust L 1 -lter to nd the states of the CARMA process. The procedure also involves the empirical and theoretical risk premiums which { as a by-product { are also estimated. We apply this procedure to data from the German electricity exchange EEX, where we split the empirical analysis into base load and peak load prices. We nd an overall negative risk premium for the base load futures contracts, except for contracts close to delivery, where a small positive risk premium is detected. The peak load contracts, on the other hand, show a clear positive risk premium, when they are close to delivery, while the contracts in the longer end also have a negative premium. AMS 2000 Subject Classications: primary: 60G52, 62M10, 91B84 secondary: 60G10, 60G51, 91B70
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2012-01-05 |