A jump diffusion model for spot electricity prices and market price of risk

作者：Bhar Ramaprasad; Colwell David B; Xiao Yuewen^*

来源：Physica A: Statistical Mechanics and Its Applications , 2013, 392(15): 3213-3222.

DOI：10.1016/j.physa.2013.03.026

• Jump diffusion
• Electricity price modeling
• Market price of risk
• Kalman filter

We construct a jump-diffusion model with seasonality, mean-reversion, time-dependent jump intensity and heteroskedastic disturbance for electricity spot prices, while keeping the analytical tractability of futures prices. We find that the jump component plays a considerably larger role than the diffusion component in the variance of spot prices. Moreover, the jump intensity is much higher during summer and winter. We also explore the seasonal market price of risk (MPR) with different maturities, from one month to five months. Our results show that the diffusion risk and the jump risk are priced quite differently.

• 出版日期2013-8-1