Modelling electricity forward markets by ambit fields

Ole E. Barndorff–Nielsen (), Fred Espen Benth () and Almut Veraart
Additional contact information
Ole E. Barndorff–Nielsen: 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

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper proposes a new modelling framework for electricity forward markets, which is based on ambit fields. The new model can capture many of the stylised facts observed in energy markets. One of the main differences to the traditional models lies in the fact that we do not model the dynamics, but the forward price directly, where we focus on models which are stationary in time. We give a detailed account on the probabilistic properties of the new model and we discuss martingale conditions and change of measure within the new model class. Also, we derive a model for the spot price which is obtained from the forward model through a limiting argument.

Keywords: Electricity markets; forward prices; random fields; ambit fields; stochastic volatility. (search for similar items in EconPapers)
JEL-codes: C0 C1 C5 G1 (search for similar items in EconPapers)
Pages: 33
Date: 2010-08-20
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2010-41

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