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A survey of commodity markets and structural models for electricity prices

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posted on 2023-06-08, 15:25 authored by René Carmona, Michael Coulon
The goal of this survey is to review the major idiosyncrasies of the commodity markets and the methods which have been proposed to handle them in spot and forward price models. We devote special attention to the most idiosyncratic of all: electricity markets. Following a discussion of traded instruments, market features, historical perspectives, recent developments and various modeling approaches, we focus on the important role of other energy prices and fundamental factors in setting the power price. In doing so, we present a detailed analysis of the structural approach for electricity, arguing for its merits over traditional reduced form models. Building on several recent articles, we advocate a broad and flexible structural framework for spot prices, incorporating demand, capacity and fuel prices in several ways, while calculating closed-form forward prices throughout.

History

Publication status

  • Published

File Version

  • Accepted version

Publisher

Springer-Verlag

Page range

41-83

Pages

294.0

Book title

Quantitative energy finance: modeling, pricing, and hedging in energy and commodity markets

Place of publication

New York

ISBN

9781461472476

Department affiliated with

  • Business and Management Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Editors

Valery A Kholodnyi, Peter Laurence, Fred Espen Benth

Legacy Posted Date

2013-07-26

First Open Access (FOA) Date

2016-03-22

First Compliant Deposit (FCD) Date

2016-03-22

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