Stochastic Volatility Models For The European Electricity Markets

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Stochastic Volatility Models for the European Electricity Markets

Author : Per Bjarte Solibakke
Publisher :
ISBN 13 :
Total Pages : 52 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Stochastic Volatility Models for the European Electricity Markets by : Per Bjarte Solibakke

Download or read book Stochastic Volatility Models for the European Electricity Markets written by Per Bjarte Solibakke and published by . This book was released on 2014 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds and implements a multifactor stochastic volatility model for the latent (and observable) volatility from the quarter and year forward contracts at the NASDAQ OMX Commodity Exchanges, applying Bayesian Markov chain Monte Carlo simulation methodologies for estimation, inference, and model adequacy assessment. Stochastic volatility is the main way time-varying volatility is modelled in financial markets. An appropriate scientific model description, specifying volatility as having its own stochastic process, broadens the applications into derivative pricing purposes, risk assessment and asset allocation and portfolio management. From an estimated optimal and appropriate stochastic volatility model, the paper reports risk and portfolio measures, extracts conditional one-step-ahead moments (smoothing), forecast one-step-ahead conditional volatility (filtering), evaluates shocks from conditional variance functions, analyses multi-step-ahead dynamics, and calculates conditional persistence measures. (Exotic) option prices can be calculated using the re-projected conditional volatility. Observed market prices and implied volatilities establish market risk premiums. The analysis adds insight and enables forecasts to be made, building up the methodology for developing valid scientific commodity market models.

Real Options In Energy And Commodity Markets

Author : Nicola Secomandi
Publisher : World Scientific
ISBN 13 : 9813149426
Total Pages : 258 pages
Book Rating : 4.8/5 (131 download)

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Book Synopsis Real Options In Energy And Commodity Markets by : Nicola Secomandi

Download or read book Real Options In Energy And Commodity Markets written by Nicola Secomandi and published by World Scientific. This book was released on 2016-11-28 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: The field of real options is concerned with the management and financial valuation of operational flexibility in business endeavors. From the very outset, energy and commodity markets — which play fundamental roles in the worldwide economy — have provided a relevant context for real option analysis, both in theory and practice.This volume is a collection of six chapters covering recent research on real options in energy and commodity markets, reflecting the significance of these markets for real option analysis. The volume is divided into two parts — the first on theory and the second on methods and applications.The two chapters in the first part of the book respectively address commodity storage and the concept of convenience yield, and how the management of real options can be impacted by the trader's own market decisions in the context of commodity shipping.The four chapters in the second part of the book propose and apply real option models in various domains — modeling the evolution of futures prices of emission certificates; managing copper extraction illustrated with an application to a project at Codelco, Chile, the largest copper producer in the world; the core ideas behind real option analysis in the context of the merchant management of hydrocarbon cracking operations; and optimizing the portfolio of contracts that oil refineries use to market their gasoline production.

Stochastic Modelling of Electricity and Related Markets

Author : Fred Espen Benth
Publisher : World Scientific
ISBN 13 : 9812812318
Total Pages : 352 pages
Book Rating : 4.8/5 (128 download)

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Book Synopsis Stochastic Modelling of Electricity and Related Markets by : Fred Espen Benth

Download or read book Stochastic Modelling of Electricity and Related Markets written by Fred Espen Benth and published by World Scientific. This book was released on 2008 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: The markets for electricity, gas and temperature have distinctive features, which provide the focus for countless studies. For instance, electricity and gas prices may soar several magnitudes above their normal levels within a short time due to imbalances in supply and demand, yielding what is known as spikes in the spot prices. The markets are also largely influenced by seasons, since power demand for heating and cooling varies over the year. The incompleteness of the markets, due to nonstorability of electricity and temperature as well as limited storage capacity of gas, makes spot-forward hedging impossible. Moreover, futures contracts are typically settled over a time period rather than at a fixed date. All these aspects of the markets create new challenges when analyzing price dynamics of spot, futures and other derivatives. This book provides a concise and rigorous treatment on the stochastic modeling of energy markets. OrnsteinOCoUhlenbeck processes are described as the basic modeling tool for spot price dynamics, where innovations are driven by time-inhomogeneous jump processes. Temperature futures are studied based on a continuous higher-order autoregressive model for the temperature dynamics. The theory presented here pays special attention to the seasonality of volatility and the Samuelson effect. Empirical studies using data from electricity, temperature and gas markets are given to link theory to practice. Sample Chapter(s). A Survey of Electricity and Related Markets (331 KB). Contents: A Survey of Electricity and Related Markets; Stochastic Analysis for Independent Increment Processes; Stochastic Models for the Energy Spot Price Dynamics; Pricing of Forwards and Swaps Based on the Spot Price; Applications to the Gas Markets; Modeling Forwards and Swaps Using the HeathOCoJarrowOCoMorton Approach; Constructing Smooth Forward Curves in Electricity Markets; Modeling of the Electricity Futures Market; Pricing and Hedging of Energy Options; Analysis of Temperature Derivatives. Readership: Researchers in energy and commodity markets, and mathematical finance.

Stochastic Modelling of Volatility and Inter-relationships in the Australian Electricity Markets

Author : Joanna (Jia Jia) Wang
Publisher :
ISBN 13 :
Total Pages : 27 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Stochastic Modelling of Volatility and Inter-relationships in the Australian Electricity Markets by : Joanna (Jia Jia) Wang

Download or read book Stochastic Modelling of Volatility and Inter-relationships in the Australian Electricity Markets written by Joanna (Jia Jia) Wang and published by . This book was released on 2020 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: To model the price and price volatilities of the Australian wholesale spot electricity markets, the univariate generalised autoregressive conditional heteroskedasticity (GARCH) models have been applied and the inter-relationships in these markets are modelled using multivariate GARCH models. Stochastic volatility (SV) models, as flexible alternatives to GARCH models, have demonstrated their superiority in many financial applications. However, the use of SV models in the modelling of electricity markets is still quite limited. This paper investigates existing multivariate SV models and proposes new SV models with skew error distributions, to model the price and price volatilities of three pairs of markets, selected from four regional electricity markets in Australia, which are shown to be highly correlated in a previous study (Higgs, 2009). Bayesian approach using Markov chain Monte Carlo (MCMC) method is adopted and model implementation is done using the software OpenBUGS. Empirical results show that the price and volatilities of selected markets are strongly correlated across different pairs of regional markets. Based on Deviance Information Criterion, the models with skew error distributions perform better than those with symmetric distribution.

Stochastic Modeling Of Electricity And Related Markets

Author : Fred Espen Benth
Publisher : World Scientific
ISBN 13 : 9814471313
Total Pages : 352 pages
Book Rating : 4.8/5 (144 download)

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Book Synopsis Stochastic Modeling Of Electricity And Related Markets by : Fred Espen Benth

Download or read book Stochastic Modeling Of Electricity And Related Markets written by Fred Espen Benth and published by World Scientific. This book was released on 2008-04-14 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: The markets for electricity, gas and temperature have distinctive features, which provide the focus for countless studies. For instance, electricity and gas prices may soar several magnitudes above their normal levels within a short time due to imbalances in supply and demand, yielding what is known as spikes in the spot prices. The markets are also largely influenced by seasons, since power demand for heating and cooling varies over the year. The incompleteness of the markets, due to nonstorability of electricity and temperature as well as limited storage capacity of gas, makes spot-forward hedging impossible. Moreover, futures contracts are typically settled over a time period rather than at a fixed date. All these aspects of the markets create new challenges when analyzing price dynamics of spot, futures and other derivatives.This book provides a concise and rigorous treatment on the stochastic modeling of energy markets. Ornstein-Uhlenbeck processes are described as the basic modeling tool for spot price dynamics, where innovations are driven by time-inhomogeneous jump processes. Temperature futures are studied based on a continuous higher-order autoregressive model for the temperature dynamics. The theory presented here pays special attention to the seasonality of volatility and the Samuelson effect. Empirical studies using data from electricity, temperature and gas markets are given to link theory to practice.

Volatility and Volume Effects in European Electricity Spot Markets

Author : Angelica Gianfreda
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Volatility and Volume Effects in European Electricity Spot Markets by : Angelica Gianfreda

Download or read book Volatility and Volume Effects in European Electricity Spot Markets written by Angelica Gianfreda and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses the volatility of wholesale electricity markets for five markets in Europe. Using GARCH models after filtering outliers, significant asymmetric effects and volatility persistence have been documented. Moreover, empirical evidence is provided on a significant relation between volume and volatility which can be both positive or negative depending on the specific market.

Stochastic Volatility Modeling

Author : Lorenzo Bergomi
Publisher : CRC Press
ISBN 13 : 1482244071
Total Pages : 520 pages
Book Rating : 4.4/5 (822 download)

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Book Synopsis Stochastic Volatility Modeling by : Lorenzo Bergomi

Download or read book Stochastic Volatility Modeling written by Lorenzo Bergomi and published by CRC Press. This book was released on 2015-12-16 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt: Packed with insights, Lorenzo Bergomi's Stochastic Volatility Modeling explains how stochastic volatility is used to address issues arising in the modeling of derivatives, including:Which trading issues do we tackle with stochastic volatility? How do we design models and assess their relevance? How do we tell which models are usable and when does c

Uncertainties in energy markets and their consideration in energy storage evaluation

Author : Keles, Dogan
Publisher : KIT Scientific Publishing
ISBN 13 : 3731500469
Total Pages : 260 pages
Book Rating : 4.7/5 (315 download)

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Book Synopsis Uncertainties in energy markets and their consideration in energy storage evaluation by : Keles, Dogan

Download or read book Uncertainties in energy markets and their consideration in energy storage evaluation written by Keles, Dogan and published by KIT Scientific Publishing. This book was released on 2014-05-22 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book successfully illustrates the modeling of electricity prices with the help of stochastic processes. The relatively new phenomenon of negative prices is also integrated into the models. The integration of feed-in from wind power plants in energy models is also very innovative. This approach helps to simulate electricity prices in order to take into account the "merit-order effect of renewable energy". Finally, the models are used for the techno-economic evaluation of energy storages.

Modelling and Simulation of Stochastic Volatility in Finance

Author : Christian Kahl
Publisher : Universal-Publishers
ISBN 13 : 1581123833
Total Pages : 219 pages
Book Rating : 4.5/5 (811 download)

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Book Synopsis Modelling and Simulation of Stochastic Volatility in Finance by : Christian Kahl

Download or read book Modelling and Simulation of Stochastic Volatility in Finance written by Christian Kahl and published by Universal-Publishers. This book was released on 2008 with total page 219 pages. Available in PDF, EPUB and Kindle. Book excerpt: The famous Black-Scholes model was the starting point of a new financial industry and has been a very important pillar of all options trading since. One of its core assumptions is that the volatility of the underlying asset is constant. It was realised early that one has to specify a dynamic on the volatility itself to get closer to market behaviour. There are mainly two aspects making this fact apparent. Considering historical evolution of volatility by analysing time series data one observes erratic behaviour over time. Secondly, backing out implied volatility from daily traded plain vanilla options, the volatility changes with strike. The most common realisations of this phenomenon are the implied volatility smile or skew. The natural question arises how to extend the Black-Scholes model appropriately. Within this book the concept of stochastic volatility is analysed and discussed with special regard to the numerical problems occurring either in calibrating the model to the market implied volatility surface or in the numerical simulation of the two-dimensional system of stochastic differential equations required to price non-vanilla financial derivatives. We introduce a new stochastic volatility model, the so-called Hyp-Hyp model, and use Watanabe's calculus to find an analytical approximation to the model implied volatility. Further, the class of affine diffusion models, such as Heston, is analysed in view of using the characteristic function and Fourier inversion techniques to value European derivatives.

Modelling Energy Spot Prices by Volatility Modulated Lévy-Driven Volterra Processes

Author : Ole E. Barndorff-Nielsen
Publisher :
ISBN 13 :
Total Pages : 38 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Modelling Energy Spot Prices by Volatility Modulated Lévy-Driven Volterra Processes by : Ole E. Barndorff-Nielsen

Download or read book Modelling Energy Spot Prices by Volatility Modulated Lévy-Driven Volterra Processes written by Ole E. Barndorff-Nielsen and published by . This book was released on 2013 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper introduces the class of volatility modulated Lévy-driven Volterra (VMLV) processes and their important subclass of Lévy semistationary (LSS) processes as a new framework for modelling energy spot prices. The main modelling idea consists of four principles: First, deseasonalised spot prices can be modelled directly in stationarity. Second, stochastic volatility is regarded as a key factor for modelling energy spot prices. Third, the model allows for the possibility of jumps and extreme spikes and, lastly, it features great flexibility in terms of modelling the autocorrelation structure and the Samuelson effect. We provide a detailed analysis of the probabilistic properties of VMLV processes and show how they can capture many stylised facts of energy markets. Further, we derive forward prices based on our new spot price models and discuss option pricing. An empirical example based on electricity spot prices from the European Energy Exchange confirms the practical relevance of our new modelling framework.

Estimating Stochastic Volatility Models Through Indirect Inference

Author : Chiara Monfardini
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.F/5 ( download)

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Book Synopsis Estimating Stochastic Volatility Models Through Indirect Inference by : Chiara Monfardini

Download or read book Estimating Stochastic Volatility Models Through Indirect Inference written by Chiara Monfardini and published by . This book was released on 1996 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Mathematical Modelling of Contemporary Electricity Markets

Author : Athanasios Dagoumas
Publisher : Academic Press
ISBN 13 : 012821838X
Total Pages : 442 pages
Book Rating : 4.1/5 (282 download)

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Book Synopsis Mathematical Modelling of Contemporary Electricity Markets by : Athanasios Dagoumas

Download or read book Mathematical Modelling of Contemporary Electricity Markets written by Athanasios Dagoumas and published by Academic Press. This book was released on 2021-02-12 with total page 442 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mathematical Modelling of Contemporary Electricity Markets reviews major methodologies and tools to accurately analyze and forecast contemporary electricity markets in a ways that is ideal for practitioner and academic audiences. Approaches include optimization, neural networks, genetic algorithms, co-optimization, econometrics, E3 models and energy system models. The work examines how new challenges affect power market modeling, including discussions of stochastic renewables, price volatility, dynamic participation of demand, integration of storage and electric vehicles, interdependence with other commodity markets and the evolution of policy developments (market coupling processes, security of supply). Coverage addresses all major forms of electricity markets: day-ahead, forward, intraday, balancing, and capacity. Provides a diverse body of established techniques suitable for modeling any major aspect of electricity markets Familiarizes energy experts with the quantitative skills needed in competitive electricity markets Reviews market risk for energy investment decisions by stressing the multi-dimensionality of electricity markets

A Multivariate Non-Gaussian Stochastic Volatility Model with Leverage for Energy Markets

Author : Linda Vos
Publisher :
ISBN 13 :
Total Pages : 31 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis A Multivariate Non-Gaussian Stochastic Volatility Model with Leverage for Energy Markets by : Linda Vos

Download or read book A Multivariate Non-Gaussian Stochastic Volatility Model with Leverage for Energy Markets written by Linda Vos and published by . This book was released on 2014 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Spot prices in energy markets exhibit special features like price spikes, mean-reversion inverse, stochastic volatility, inverse leverage effect and co-integration between the different commodities. In this paper a multivariate stochastic volatility model is introduced which captures these features. Second order structure and stationary issues of the model are analysed. Moreover the implied multivariate forward model is derived. Due to the flexibility of the model stylized facts of the forward curve as contango, backwardation and humps are explained. Moreover, a transformed-based method to price options on the forward is described, where fast and precise algorithms for price computations can be implemented. A simulation method for Monte Carlo generation of price paths is introduced.

Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments

Author : Carol Alexander
Publisher : John Wiley & Sons
ISBN 13 : 0470997893
Total Pages : 427 pages
Book Rating : 4.4/5 (79 download)

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Book Synopsis Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments by : Carol Alexander

Download or read book Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments written by Carol Alexander and published by John Wiley & Sons. This book was released on 2008-06-09 with total page 427 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by leading market risk academic, Professor Carol Alexander, Pricing, Hedging and Trading Financial Instruments forms part three of the Market Risk Analysis four volume set. This book is an in-depth, practical and accessible guide to the models that are used for pricing and the strategies that are used for hedging financial instruments, and to the markets in which they trade. It provides a comprehensive, rigorous and accessible introduction to bonds, swaps, futures and forwards and options, including variance swaps, volatility indices and their futures and options, to stochastic volatility models and to modelling the implied and local volatility surfaces. All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM . Empirical examples and case studies specific to this volume include: Duration-Convexity approximation to bond portfolios, and portfolio immunization; Pricing floaters and vanilla, basis and variance swaps; Coupon stripping and yield curve fitting; Proxy hedging, and hedging international securities and energy futures portfolios; Pricing models for European exotics, including barriers, Asians, look-backs, choosers, capped, contingent, power, quanto, compo, exchange, ‘best-of’ and spread options; Libor model calibration; Dynamic models for implied volatility based on principal component analysis; Calibration of stochastic volatility models (Matlab code); Simulations from stochastic volatility and jump models; Duration, PV01 and volatility invariant cash flow mappings; Delta-gamma-theta-vega mappings for options portfolios; Volatility beta mapping to volatility indices.

Stochastic Dependencies of Spot Prices in the European Electricity Markets

Author : Iva Mihaylova
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (73 download)

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Book Synopsis Stochastic Dependencies of Spot Prices in the European Electricity Markets by : Iva Mihaylova

Download or read book Stochastic Dependencies of Spot Prices in the European Electricity Markets written by Iva Mihaylova and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Estimation of a Longitudinal Multivariate Stochastic Volatility Model for the Analysis of Intra-day Electricity Prices

Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (836 download)

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Book Synopsis Estimation of a Longitudinal Multivariate Stochastic Volatility Model for the Analysis of Intra-day Electricity Prices by :

Download or read book Estimation of a Longitudinal Multivariate Stochastic Volatility Model for the Analysis of Intra-day Electricity Prices written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Modeling Dependence Between European Electricity Markets

Author : Jiechen Tang
Publisher :
ISBN 13 :
Total Pages : 32 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Modeling Dependence Between European Electricity Markets by : Jiechen Tang

Download or read book Modeling Dependence Between European Electricity Markets written by Jiechen Tang and published by . This book was released on 2018 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we examine various behaviors of both base and peak spot returns in the European electricity markets and how European electricity markets integrate; we do so by employing an ARIMA-GARCH model, several static copulas, and the dynamic Student-t copula. We find positive dependence among the European electricity markets. Second, most of pairs among European electricity markets co-move symmetrically. Third, The dependence is stronger for the peak than for the base returns. We also detect tail dependence and extreme co-movement for most of the European electricity markets. In addition, we find that the tail dependence and extreme co-movement are higher for markets in France, Germany, and the Netherlands and lower for the Spanish and British markets. Last, we find that the dependence varies over time but does not appear to grow over time in most of the pairs of the markets. Our findings provide useful information for integration, risk management, and asset pricing for the European electricity markets.