Polynomial Processes for Power Prices

Tony Ware

Applied Mathematical Finance, 2019, vol. 26, issue 5, 453-474

Abstract: Polynomial processes have the property that expectations of polynomial functions (of degree n, say) of the future state of the process conditional on the current state are given by polynomials (of degree ≤ n) of the current state. Here we explore the potential of polynomial maps of polynomial processes for modelling energy prices. We focus on the example of Alberta power prices, derive one- and two-factor models for spot prices. We examine their performance in numerical experiments, and demonstrate that the richness of the dynamics they are able to generate makes them well suited for modelling even extreme examples of energy price behaviour.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/1350486X.2020.1715808 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apmtfi:v:26:y:2019:i:5:p:453-474

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAMF20

DOI: 10.1080/1350486X.2020.1715808

Access Statistics for this article

Applied Mathematical Finance is currently edited by Professor Ben Hambly and Christoph Reisinger

More articles in Applied Mathematical Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().