We present a numerical method for pricing derivatives on electricity prices. The method is based on approximating the generator of the underlying process and can be applied for stochastic processes that are combinations of diffusions and jump processes. The method is accurate even in the case of...

We present a numerical algorithm for pricing derivatives on electricity prices. The algorithm is based on approximating the generator of the underlying price process on a lattice of prices, resulting in an approximation of the stochastic process by a continuous time Markov chain. We numerically...