Spot and Derivative Pricing in the EEX Power Market

Bierbrauer, Michael, Menn, Christian, Rachev, Svetlozar, & Trueck, Stefan (2007) Spot and Derivative Pricing in the EEX Power Market. Journal of Banking and Finance, 31(11), pp. 3462-3485.

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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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70 citations in Scopus
63 citations in Web of Science®
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ID Code: 8160
Item Type: Journal Article
Refereed: Yes
Additional Information: For more information, please refer to the publisher's website (link above) or contact the author:
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Keywords: Power Markets, Spot Price Modeling, Regime Switching Models, Forward Premium
DOI: 10.1016/j.jbankfin.2007.04.011
ISSN: 0378-4266
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 00:00
Last Modified: 25 Jun 2014 07:39

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