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dc.contributor.authorBenth, Fred Espen
dc.contributor.authorParaschiv, Florentina
dc.identifier.citationJournal of Banking & Finance. 2017, .nb_NO
dc.description.abstractStochastic models for forward electricity prices are of great relevance nowadays, given the major structural changes in the market due to the increase of renewable energy in the production mix. In this study, we derive a spatio-temporal dynamical model based on the Heath-Jarrow-Morton (HJM) approach under the Musiela parametrization, which ensures an arbitrage-free model for electricity forward prices. The model is fitted to a unique data set of historical price forward curves. As a particular feature of the model, we disentangle the temporal from spatial (maturity) effects on the dynamics of forward prices, and shed light on the statistical properties of risk premia, of the noise volatility term structure and of the spatio-temporal noise correlation structures. We find that the short-term risk premia oscillates around zero, but becomes negative in the long run. We identify the Samuelson effect in the volatility term structure and volatility bumps, explained by market fundamentals. Furthermore we find evidence for coloured noise and correlated residuals, which we model by a Hilbert space-valued normal inverse Gaussian Lévy process with a suitable covariance functional.nb_NO
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 Internasjonal*
dc.titleA space-time random field model for electricity forward prices (Best Energy Paper Award, ECOMFIN 2016, Paris)nb_NO
dc.typeJournal articlenb_NO
dc.typePeer reviewednb_NO
dc.source.journalJournal of Banking & Financenb_NO
dc.description.localcode© 2017. This is the authors’ accepted and refereed manuscript to the article. Locked until 30.3.2020 due to copyright restrictions. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
cristin.unitnameNTNU Handelshøyskolen

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Attribution-NonCommercial-NoDerivatives 4.0 Internasjonal
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