Kiesel, Rüdiger; Schindlmayr, Gero; Börger, Reik:
A two-factor model for the electricity forward market
In: Quantitative Finance, Vol. 9 (2009), No. 3, pp. 279 - 287
2009article/chapter in journalOpen Access
Economics
Related: 1 publication(s)
Title in English:
A two-factor model for the electricity forward market
Author:
Kiesel, RüdigerUDE
GND
172185262
LSF ID
51086
ORCID
0000-0002-3089-2076ORCID iD
Other
connected with university
;
Schindlmayr, Gero;Börger, Reik
Year of publication:
2009
Open Access?:
Open Access
Language of text:
English

Abstract in English:

This paper provides a two-factor model for electricity futures, which captures the main features of the market and fits the term structure of volatility. The approach extends the one-factor-model of Clewlow and Strickland to a two-factor model and modifies it to make it applicable to the electricity market. We will especially take care of the existence of delivery periods in the underlying futures. Additionally, the model is calibrated to options on electricity futures and its performance for practical application is discussed.