Modelling Energy Markets with Extreme Spikes

  • Thorsten Schmidt


This paper suggests a new approach to model spot prices of electricity. It uses a shot-noise model to capture extreme spikes typically arising in electricity markets. Moreover, the model easily accounts for seasonality and mean reversion. We compute futures prices in closed form and show that the resulting shapes capture a large variety of typically observed term structures. For statistical purposes we show how to use the EM-algorithm. An estimation on spot price data from the European Energy Exchange illustrate the applicability of the model.


Term Structure Electricity Market Electricity Price Future Price Martingale Measure 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2008

Authors and Affiliations

  • Thorsten Schmidt
    • 1
  1. 1.Department of MathematicsUniversity of LeipzigLeipzigGermany

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