Stochastic Modeling of Electricity and Related Markets

(Advanced Series on Statistical Science and Applied Probability) (Volume 11)

51OC9WTRq3L._SY291_BO1,204,203,200_QL40_ Author Fred Espen Benth and Jurate Saltyte Benth
Isbn 9789812812308
File size 2MB
Year 2008
Pages 352
Language English
File format PDF
Category Economics

Book Description:

The book looks at two different model approaches (geometric and arithmetic), and gives good information about each approach throughout the text, such as limitations, advantages and parameter estimation. It also uses three markets as example markets: power, gas and temperature. All markets are modeled and discussed extensively, and at this level of mathematical modeling I believe this is the most concise treatment of weather derivatives publicly available. It has a chapter alone dedicated to modeling of weather derivatives, with empirical results.

The book explains forward curve generation and smoothing principles in details, and also gives estimated parameters for a real life example. It has own sections for the market price of risk, both from the practical and theoretical side, and also shows how to model spikes and the authors success with different approaches catching the heavy tales and spikes.

The book takes you through options and hedging such that it is easy applicable to many of the deal structures containing flex or optionality. It includes theory and empirical results for standard options with jumps, but also spread and Asian options, and a direct approach for spark spread options.


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