The liberalisation of energy markets entails the appearance of market risks which must be borne by market participants: producers, retailers, and final consumers. Some of these risks can be managed by participating in the forward markets and transferring it to other agents who are willing to...

We propose a two-factor jump-diffusion model with seasonality for the valuation of electricity future contracts. The model we propose is an extension of Schwartz and Smith (Management Science, 2000) long-term / short-term model. One of the main contributions of the paper is the inclusion of a...

We propose a model where wholesale electricity prices are explained by two state variables: demand and capacity. We derive analytical expressions to price forward contracts and to calculate the forward premium. We apply our model to the PJM, England and Wales, and Nord Pool markets. Our...

This paper analyses the evolution of electricity prices in deregulated markets. We present a general model that simultaneously takes into account the possibility of several factors: seasonality, mean reversion, GARCH behaviour and time-dependent jumps. The model is applied to equilibrium spot...

We propose a two-factor jump-diffusion model with seasonality for the valuation of electricity future contracts. The model we propose is an extension of Schwartz and Smith (Management Science, 2000) and Lucia and Schwartz (Review of Derivatives Research, 2002), long-term / short-term model. One...