Modelling Power Forward Prices for Positive and Negative Power Spot Prices with Upward and Downward Spikes in the Framework of the Non-Markovian Approach

Chapter

Abstract

As power markets are becoming deregulated worldwide, the modelling of power forward prices is becoming a key problem in energy trading, risk management, and physical assets valuation. In this paper we present and further develop the non-Markovian approach to modelling power spot prices with spikes proposed earlier by the author. In contrast to other approaches, we model power spot prices with spikes as a non-Markovian stochastic process that allows for a unified modelling of positive and negative power spot prices as well as upward and downward spikes directly as self-reversing jumps. We show how this approach can be used for a unified modelling of positive and negative power forward prices in the case of positive and negative power spot prices with upward and downward spikes.

Keywords

Sine Volatility 

Notes

Acknowledgments

I am grateful to my wife Larisa and my sons Nikita and Ilya for their love, patience, and care. I am also grateful to an anonymous referee for carefully reading the manuscript.

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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Verbund Trading, AGViennaAustria

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