Electricity Markets

Meyer‐Brandis, Thilo (2010): Electricity Markets. In: Cont, Rama (Hrsg.): Encyclopedia of Quantitative Finance. 2. E - J. Chichester [u.a.]: Wiley.

Abstract

Since the early 1990s, an increasing number of countries worldwide have liberalized their electricity power sectors. Contrary to the situation that prevailed earlier, when power sectors were not open to competition and prices were set by regulators according to the cost of generation, transmission, and distribution, electricity prices are now determined by an equilibrium of supply and demand. On one hand, electricity contracts are traded over the counter through bilateral agreements. On the other hand, the deregulation of electricity markets has led to the creation of organized electricity exchanges, where electricity is quoted almost as any other commodity. One effect of the liberalization of electricity markets is the introduction of substantial price risk with volatilities much higher than on stock markets and with distinct features like impressive price spikes.

Therefore, a precise statistical modeling of electricity price behavior is necessary for energy risk management, pricing of electricity-related options, and evaluation of production assets. In this article, we give a short introduction to modern electricity markets, before we focus on an overview of reduced-form models for electricity spot prices proposed in the literature.

• Dokumententyp: Buchbeitrag
• Fakultät: Mathematik, Informatik und Statistik > Mathematik > Finanz- und Versicherungsmathematik
• Themengebiete: 500 Naturwissenschaften und Mathematik > 510 Mathematik
• ISBN: 978-0-470-06160-2 ; 978-0-470-05756-8
• Ort: Chichester [u.a.]
• Sprache: Englisch