Dynamic pricing of wind futures

Fred Espen Benth and Jurate Saltyte Benth

Energy Economics, 2009, vol. 31, issue 1, pages 16-24

Abstract: Daily average wind speeds are dynamically modelled by a continuous-time autoregressive model with seasonal mean and volatility. Futures prices based on an index of aggregated wind speeds are derived, and it is shown that the Samuelson effect breaks down. The volatility of these futures will decrease when approaching maturity, an effect which is explained by the memory in higher-order autoregressive models.

Keywords: Wind; power; Weather; derivatives; Wind; futures; Hedging; Continuous-time; autoregressive; process; Seasonality; Samuelson; effect (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:eneeco:v:31:y:2009:i:1:p:16-24

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