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A DIFFUSION MODEL FOR ELECTRICITY PRICES
Author(s) -
Barlow M. T.
Publication year - 2002
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/j.1467-9965.2002.tb00125.x
Subject(s) - economics , spot contract , electricity , econometrics , electricity market , diffusion , electricity demand , financial economics , electricity generation , power (physics) , futures contract , physics , thermodynamics , quantum mechanics
Starting from a simple supply/demand model for electricity, we obtain a diffusion (i.e., jumpless) model for spot prices which can exhibit price spikes. We estimate the parameters in the model using historical data from the Alberta and California markets. and compare this model with some others used for spot prices.