Optimal execution in intraday energy markets under Hawkes processes with transient impact

Konstantinos Chatziandreou and Sven Karbach

Quantitative Finance, 2026, vol. 26, issue 2, 185-211

Abstract: This paper investigates optimal execution strategies in intraday energy markets through a mutually exciting Hawkes process model. Calibrated to data from the German intraday electricity market, the model effectively captures key empirical features, including intra-session volatility, distinct intraday market activity patterns, and the Samuelson effect as gate closure approaches. By integrating a transient price impact model with a bivariate Hawkes process to model the market order flow, we derive an optimal trading trajectory for energy companies managing large volumes, accounting for the specific trading patterns of these markets. A back-testing analysis compares the proposed strategy against standard benchmarks such as Time-Weighted Average Price (TWAP) and Volume-Weighted Average Price (VWAP), demonstrating substantial cost reductions across various hourly trading products in intraday energy markets.

Date: 2026
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DOI: 10.1080/14697688.2025.2597415

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