Spot and Derivative Pricing in the EEX Power Market
Using spot and futures price data from the German EEX Power market, we test the adequacy of various one-factor and two-factor models for electricity spot prices. The models are compared along two different dimensions: (1) We assess their ability to explain the major data characteristics and (2) the forecasting accuracy for expected future spot prices is analyzed. We find that the regime switching models clearly out-perform its competitors in almost all respects. The best results are obtained using a two-regime model with a Gaussian distribution in the spike regime. Furthermore, for short and medium-term periods our results underpin the frequently stated hy-pothesis that electricity futures quotes are consistently greater than the expected future spot, a situation which is denoted as contango.
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|Item Type:||Journal Article|
|Additional Information:||For more information, please refer to the publisher's website (link above) or contact the author: firstname.lastname@example.org|
|Keywords:||Power Markets, Spot Price Modeling, Regime Switching Models, Forward Premium|
|Subjects:||Australian and New Zealand Standard Research Classification > ECONOMICS (140000)|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School|
|Copyright Owner:||Copyright 2007 Elsevier.|
|Deposited On:||20 Jun 2007|
|Last Modified:||11 Aug 2011 02:58|
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