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Quantitative Energy Finance pp 189–211Cite as

Modelling Power Forward Prices for Positive and Negative Power Spot Prices with Upward and Downward Spikes in the Framework of the Non-Markovian Approach

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Abstract

As power markets are becoming deregulated worldwide, the modelling of power forward prices is becoming a key problem in energy trading, risk management, and physical assets valuation. In this paper we present and further develop the non-Markovian approach to modelling power spot prices with spikes proposed earlier by the author. In contrast to other approaches, we model power spot prices with spikes as a non-Markovian stochastic process that allows for a unified modelling of positive and negative power spot prices as well as upward and downward spikes directly as self-reversing jumps. We show how this approach can be used for a unified modelling of positive and negative power forward prices in the case of positive and negative power spot prices with upward and downward spikes.

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Acknowledgments

I am grateful to my wife Larisa and my sons Nikita and Ilya for their love, patience, and care. I am also grateful to an anonymous referee for carefully reading the manuscript.

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Authors and Affiliations

  1. Verbund Trading, AG, Am Hof 6a, 1010, Vienna, Austria

    Valery A. Kholodnyi

Authors
  1. Valery A. Kholodnyi
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Correspondence to Valery A. Kholodnyi .

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Editors and Affiliations

  1. Center of Mathematics for Applications, University of Oslo, Oslo, Norway

    Fred Espen Benth

  2. Verbund Trading AG, Vienna, Austria

    Valery A. Kholodnyi

  3. Dipartimento di Matematica, University di Roma, La Sapienza, Rome, Italy

    Peter Laurence

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Kholodnyi, V.A. (2014). Modelling Power Forward Prices for Positive and Negative Power Spot Prices with Upward and Downward Spikes in the Framework of the Non-Markovian Approach. In: Benth, F., Kholodnyi, V., Laurence, P. (eds) Quantitative Energy Finance. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7248-3_7

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