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This paper contributes to the ongoing discussion on price formation in electricity markets. For this, we conduct an analysis of the German electricity wholesale spot market which is located at the European Energy Exchange (EEX). Our dataset covers three spot market segments, namely the intraday...
Persistent link: https://www.econbiz.de/10009219938
In this paper, we present an analytical bid stack model for the electricity market which is extended to the case of an arbitrary number N of technology classes embedded in the production stack (esp. for N 2). As bid stack model, the proposed framework represents a structural model that...
Persistent link: https://www.econbiz.de/10012965803
This paper proposes a new, structural model for electricity prices. We show that unlike other electricity price models, such as the jump diffusion model and the Box-Cox transformation model, the structural model can directly and accurately incorporate the relationship between electricity demand...
Persistent link: https://www.econbiz.de/10014070936
We examine the decision problem of a power producer contemplating an upgrade of its current generation capacity based on a fossil fuel technology (gas plant), when price processes have affine drift and differentiable volatility functions. The operator can choose the best of four mutually...
Persistent link: https://www.econbiz.de/10014083352
The mechanism behind price formation in electricity futures markets is still under discussion. Theory suggests that hedging pressure caused by deviating risk preferences is the most promising approach. This paper contributes to this discussion through an empirical investigation of electricity...
Persistent link: https://www.econbiz.de/10014208135
Persistent link: https://www.econbiz.de/10009724148
We analyze American put options in a hyper-exponential jump-diffusion model. Our contribution is threefold. Firstly, by following a maturity randomization approach, we solve the partial integro-differential equation and obtain a tight lower bound for the American option price. Secondly, our...
Persistent link: https://www.econbiz.de/10011293508
We examine the impact of interest rates benchmark reform and upcoming Libor transition on options markets. We address various modelling challenges the transition brings. We specifically focus on the impact of the clearing houses' discounting switch on swaptions, and the consequences of Libor...
Persistent link: https://www.econbiz.de/10012841604
Option pricing models are tools for pricing and hedging derivatives. Good models are complex and the econometrician faces many design decisions when bringing them to the data. I show that strategically constructed low-dimensional filter designs outperform those that try to use all the available...
Persistent link: https://www.econbiz.de/10012842894
This paper presents a new option pricing approach for all underlying assets that precisely fits the market data. We obtain the probability density function of the underlying asset without any external parameter. The density function for a given expiration date is uniquely determined by the...
Persistent link: https://www.econbiz.de/10012951374