A semiparametric factor model for electricity forward curve dynamics

Szymon Borak and Rafał Weron

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we introduce the dynamic semiparametric factor model (DSFM) for electricity forward curves. The biggest advantage of our approach is that it not only leads to smooth, seasonal forward curves extracted from exchange traded futures and forward electricity contracts, but also to a parsimonious factor representation of the curve. Using closing prices from the Nordic power market Nord Pool we provide empirical evidence that the DSFM is an efficient tool for approximating forward curve dynamics.

Keywords: power market; forward electricity curve; dynamic semiparametric factor model (search for similar items in EconPapers)
JEL-codes: C51 G13 Q40 (search for similar items in EconPapers)
Date: 2008-07-10
New Economics Papers: this item is included in nep-ecm and nep-ene
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Citations: View citations in EconPapers (21)

Forthcoming in Journal of Energy Markets 1 (3) (2008): pp. 3-16

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Related works:
Working Paper: A semiparametric factor model for electricity forward curve dynamics (2008)
Journal Article: A semiparametric factor model for electricity forward curve dynamics
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:10421

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