Using Affine Jump Diffusion Models for Modelling and Pricing Electricity Derivatives

References

• Ball , C. A. and Torous , W. N. 1983 . A simplified jump process for common stock returns . Journal of Financial and Quantitative Analysis , 18 (1) : 53 – 65 .
   Web of Science ®Google Scholar
• Ball , C. A. and Torous , W. N. 1985 . On jumps in common stock prices and their impact on call option pricing . Journal of Finance , 40 : 155 – 173 .
   Web of Science ®Google Scholar
• Barlow , M. T. 2002 . A diffusion model for electricity prices . Mathematical Finance , 12 : 287 – 298 .
   Web of Science ®Google Scholar
• Benth , F. E. , Kallsen , J. and Meyer‐Brandis , J. 2007 . A non‐Gaussian Ornstein‐Uhlenbeck process for electricity spot price modelling and derivatives pricing . Applied Mathematical Finance , 14 (2) : 153 – 169 .
   Google Scholar
• Bessembinder , H. and Lemmon , M. L. 2002 . Equilibrium pricing and optimal hedging in electricity forward markets . Journal of Finance , 57 : 1347 – 1382 .
   Web of Science ®Google Scholar
• Bhanot , K. 2000 . Behavior of power prices: implications for the valuation and hedging of financial contracts . Journal of Risk , 2 : 43 – 62 .
   Google Scholar
• Borovkova , S. and Permana , F. J. 2004 . Modelling electricity prices by the potential jump‐diffusion . Proceedings of the Stochastic Finance 2004 Conference ,
   Google Scholar
• Burger , M. , Klar , B. , Muller , A. and Schindlmayr , G. 2004 . A spot market model for pricing derivatives in electricity markets . Quantitative Finance , 4 : 109 – 122 .
   Web of Science ®Google Scholar
• Cartea , A. and Figueroa , M. G. 2005 . Pricing in electricity markets: a mean reverting jump diffusion model with seasonality . Applied Mathematical Finance , 12 (4) : 313 – 335 .
   Google Scholar
• Clewlow , L. and Strickland , C. 1999b . Valuing energy options in a one factor model fitted to forward prices. Quantitative Finance Research Group, Working paper, University of Technology (Sydney)
   Google Scholar
• Clewlow , L. and Strickland , C. 2000 . Energy Derivatives: Pricing and Risk Management
   Google Scholar
• Cox , J. C. , Ingersoll , J. E. and Ross , S. A. 1981 . The relation between forward prices and futures prices . Journal of Financial Economics , 9 : 321 – 346 .
   Web of Science ®Google Scholar
• Deng , S. 2001 . Stochastic models of energy commodity prices and their applications: mean‐reversion with jumps and spikes. UCEI, PWP‐073
   Google Scholar
• Diebold , F. X. and Mariano , R. S. 1995 . Comparing predictive accuracy . Journal of Business & Economic Statistics , 13 : 253 – 263 .
   Web of Science ®Google Scholar
• Duffie , D. 1999 . “ Volatility in Energy Prices ” . In Managing Energy Price Risk , London : RISK Books . 2nd edn
   Google Scholar
• Duffie , D. , Pan , J. and Singleton , K. 2000 . Transform analysis and asset pricing for affine jump‐diffusions . Econometrica , 68 : 1343 – 1376 .
   Web of Science ®Google Scholar
• Escribano , A. , Peña , J. I. and Villaplana , P. 2002 . Modelling electricity prices: international evidence. Universidad Carlos III, working paper 02‐27
   Google Scholar
• Ethier , S. and Kurtz , T. 1986 . Markov Processes, Characterization and Convergence , New York : John Wiley & Sons .
   Google Scholar
• Eydeland , A. and Geman , H. 1998 . Pricing power derivatives . Risk , : 71 – 73 . October
   Google Scholar
• Geman , H. and Roncoroni , A. 2006 . Understanding the fine structure of electricity prices . Journal of Business , 79 : 1 – 74 .
   Google Scholar
• Geman , H. and Vasicek , O. 2001 . “ Forwards and futures contracts on non‐storable commodities: the case of electricity ” . In Risk August
   Google Scholar
• Geman , H. 2005 . Commodities and Commodity Derivatives: Modelling and Pricing for Agriculturals, Metal and Energy
   Google Scholar
• Harrison , J. M. and Kreps , D. M. 1979 . Martingales and arbitrage in multiperiod securities markets . Journal of Economic Theory , 20 : 381 – 408 .
   Web of Science ®Google Scholar
• Phillip , Kelleharhals B. 2002 . Pricing electricity forwards under stochastic volatility. Working Paper
   Google Scholar
• Koekebakker , S. and Ollmar , F. 2001 . Forward curve dynamics in the Nordic electricity market. Preprint, Norwegian School of Economics and Business Administration
   Google Scholar
• Longstaff , F. and Wang , A. 2004 . Electricity forward prices: a high‐frequency empirical analysis . Journal of Finance , 59 : 1877 – 1900 .
   Web of Science ®Google Scholar
• Lucia , J. and Schwartz , E. 2002 . Electricity prices and power derivatives. Evidence from Nordic Power Exchange . Review of Derivatives Research , 5 (1) : 5 – 50 .
   Google Scholar
• Manoliu , M. and Tompaidis , S. 2002 . Energy futures prices: term structure models with Kalman filter estimation . Applied Mathematical Finance , 9 (1) : 21 – 43 .
   Google Scholar
• Merton , R. 1973 . An intertemporal capital asset pricing model . Econometrica , 41 : 867 – 888 .
   Web of Science ®Google Scholar
• Newey , W. and West , K. 1987 . A simple positive semi‐definite heteroskedasticity and autocorrelation consistent covariance matrix . Econometrica , 55 : 703 – 708 .
   Web of Science ®Google Scholar
• Nord Pool . Trade at Nord Pool's Financial Market (April 2004, Nord Pool ASA)
   Google Scholar
• Nord Pool . Trade at the Nordic spot market (April 2004, Nord Pool ASA)
   Google Scholar
• Pilipovic , D. 1998 . Energy Risk: Valuing and Managing Energy Derivatives , New York : McGraw‐Hill .
   Google Scholar
• Pirrong , C. and Jermakyan , M. 2000 . The price of power: the valuation of power and weather derivatives. Working Paper, Olin School of Business, Washington University
   Google Scholar
• Schwartz , E. 1997 . The stochastic behaviour of commodity prices: implications for valuations and hedging . Journal of Finance , 52 : 923 – 973 .
   Web of Science ®Google Scholar
• Simonsen , I. , Weron , R. and Mo , B. 2004 . Structure and stylised facts of a deregulated power market, preprint submitted to Elsevier Science
   Google Scholar
• Vasicek , O. 1977 . An equilibrium characterization of the term structure . Journal of Finance , 5 : 177 – 188 .
   Google Scholar
• Villaplana , P. 2003 . Pricing power derivatives: a two factor jump‐diffusion approach. Working Paper, Universitat Pompeu Fabra
   Google Scholar
• Weron , R. 2007 . Market price of risk implied by Asian‐style electricity‐options and futures . Energy Economics ,
   Google Scholar
• White , H. 1980 . A heteroskedasticity‐consistent covariance matrix estimator and a direct tests for heteroskedasticity . Econometrica , 48 : 817 – 838 .
   Web of Science ®Google Scholar