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    Understanding the fine structure of electricity prices

    Geman, Hélyette and Roncoroni, A. (2006) Understanding the fine structure of electricity prices. Journal of Business 79 (3), pp. 1225-1261. ISSN 0021-9398.

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    Abstract

    This paper analyzes the special features of electricity spot prices derived from the physics of this commodity and from the economics of supply and demand in a market pool. Besides mean reversion, a property they share with other commodities, power prices exhibit the unique feature of spikes in trajectories. We introduce a class of discontinuous processes exhibiting a "jump-reversion" component to properly represent these sharp upward moves shortly followed by drops of similar magnitude. Our approach allows to capture—for the first time to our knowledge—both the trajectorial and the statistical properties of electricity pool prices. The quality of the fitting is illustrated on a database of major U.S. power markets.

    Metadata

    Item Type: Article
    Additional Information: Copyright of Journal of Business is the property of University of Chicago Press and its content may not be emailed to multiple sites or posted to a listserv without the copyright holder’s express written permission. However, users may print, download, or email articles for individual use. Copyright and all rights therein are retained by authors or by other copyright holders. All persons downloading this information are expected to adhere to the terms and constraints invoked by copyright. © 2006 by the University of Chicago Press.
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Commodities Finance Centre
    Depositing User: Sandra Plummer
    Date Deposited: 04 Jun 2007
    Last Modified: 07 Dec 2016 15:31
    URI: http://eprints.bbk.ac.uk/id/eprint/499

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