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Titel
The market price of risk for delivery periods : pricing swaps and options in electricity markets / Annika Kemper, Maren D. Schmeck and Anna KH. Balci
VerfasserKemper, Annika ; Schmeck, Maren D. ; Balci, Anna KH.
ErschienenBielefeld, Germany : Center for Mathematical Economics (IMW), Bielefeld University, April 2020
Ausgabe
Elektronische Ressource
Umfang1 Online-Ressource (33 Seiten) : Illustrationen
SerieCenter for Mathematical Economics Working papers ; 635
SchlagwörterElektrizitätsmarkt / Swap / Lieferzeit / Strompreis / Volatilität / Stochastisches Modell
URNurn:nbn:de:hbz:6:2-1426876 
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The market price of risk for delivery periods [2.37 mb]
Zusammenfassung

In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an arbitrage-free pricing framework for derivatives based on these contracts. Furthermore, we use a weighted geometric averaging of an artificial geometric futures price over the corresponding delivery period. Without any need for approximations, this averaging results in geometric swap price dynamics. Our framework allows for including typical features as the Samuelson effect, seasonalities, and stochastic volatility. In particular, we investigate the pricing procedures for electricity swaps and options in line with Arismendi et al. (2016), Schneider and Tavin (2018), and Fanelli and Schmeck (2019). A numerical study highlights the differences between these models depending on the delivery period.

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