Modelling energy spot prices by Lévy semistationary processes
Barndorff–Nielsen, Ole E. (),
Fred Espen Benth () and
Almut E. D. Veraart ()
Additional contact information Barndorff–Nielsen, Ole E.: Thiele Center, Department of Mathematical Sciences and CREATES, Postal: Ny Munkegade 118, 8000 Aarhus C, Denmark
Fred Espen Benth: Centre of Mathematics for Applications, University of Oslo and Faculty of Economics University of Agder, Postal: P.O. Box 1053, Blindern, N–0316 Oslo, Norway
Authors registered in the RePEc Author Service: Ole E. Barndorff-Nielsen ()
This paper introduces a new modelling framework for energy spot prices based on Lévy semistationary processes. Lévy semistationary processes are special cases of the general class of ambit processes. We provide a detailed analysis of the probabilistic properties of such models and we show how they are able to capture many of the stylised facts observed in energy markets. Furthermore, we derive forward prices based on our spot price model. As it turns out, many of the classical spot models can be embedded into our novel modelling framework.