In this paper we address the issue of modeling spot electricity prices. After analyzing factors leading to the unobservable in other financial or commodity markets price dynamics we propose a mean reverting jump diffusion model. We fit the model to data from the Nord Pool power exchange and find...

For many economic problems standard statistical analysis, based on the notion of stationarity, is not adequate. These include modeling seasonal decisions of consumers, forecasting business cycles and - as we show in the present article - modeling wholesale power market prices. We apply standard...

Power-law tail behavior and the summation scheme of Levy-stable (alpha- stable) distributions is the basis for their frequent use as models when fat tails above a Gaussian distribution are observed. However, recent studies suggest that financial asset returns exhibit tail exponents well above...

In this paper we study simple time series models and assess their forecasting performance. In particular we calibrate ARMA and ARMAX (where the exogenous variable is the system load) processes. Models are tested on a time series of California power market system prices and loads from the period...

We address the issue of modeling spot electricity prices with regime switching models. After reviewing the stylized facts about power markets we propose and fit various models to spot prices from the Nordic power exchange. Afterwards we assess their performance by comparing simulated and market...

In this paper we study two statistical approaches to load forecasting. Both of them model electricity load as a sum of two components – a deterministic (representing seasonalities) and a stochastic (representing noise). They differ in the choice of the seasonality reduction method. Model A...

In this paper we propose a jump diffusion type model which recovers the main characteristics of electricity spot price dynamics, including seasonality, mean reversion, and spiky behavior. Calibration of the market price of risk allows for pricing of Asian-type options written on the spot...