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Modelling Jumps in Electricity Prices - Theory and Empirical Evidence

Seifert, J.; Uhrig-Homburg, M.

Abstract:
Objective of this paper is to enhance the understanding of modelling jumps and to analyse the model risk based on the jump component in electricity markets. We provide a common modelling framework that allows to incorporate the main jump patterns observed in electricity spot prices and compare the effectiveness of different jump specifications. To this end, we calibrate the models to daily European Energy Exchange (EEX) market data through Markov Chain Monte Carlo based methods. To accees the quality of the estimated jump processes, we analyse their trajectorial and statistical properties. Moreover, even when the models are calibrated to a cross-section of derivative prices substantial model risk remains.


Zugehörige Institution(en) am KIT Institut für Finanzwirtschaft, Banken und Versicherungen (FBV)
Publikationstyp Zeitschriftenaufsatz
Jahr 2007
Sprache Englisch
Identifikator ISSN: 1380-6645, 1573-7144
KITopen-ID: 1000016911
Erschienen in Review of derivatives research
Band 10
Heft 1
Seiten 59 - 85
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