scholarly journals The Effect of Mean-Reverting Processes in the Pricing of Options in the Energy Market: An Arithmetic Approach

Risks ◽  
2021 ◽  
Vol 9 (5) ◽  
pp. 100
Author(s):  
Maren Diane Schmeck ◽  
Stefan Schwerin

In this paper we study the effect that mean-reverting components in the arithmetic dynamics of electricity spot price have on the price of a call option on a swap. Our model allows for seasonal effects, spikes, and negative values of the price of electricity. We show that for sufficiently large delivery periods of the swap contract, the error that one makes by neglecting some of the mean-reverting processes affecting the spot price evolution converges to zero. The decay rate is explicitly calculated. This is achieved by exploiting the additive structure of the electricity price process in order to determine an explicit closed-form formula for the price of the call on a swap. The theoretical analysis is then illustrated via a numerical example.

2011 ◽  
Author(s):  
Fred Espen Benth ◽  
Ruediger Kiesel ◽  
Anna Nazarova

2015 ◽  
Vol 14 (04) ◽  
pp. 1550040 ◽  
Author(s):  
Qingju Fan ◽  
Dan Li

In this study, we investigate the subtle temporal dynamics of California 1999–2000 spot price series based on permutation min-entropy (PME) and complexity-entropy causality plane. The dynamical transitions of price series are captured and the temporal correlations of price series are also discriminated by the recently introduced PME. Moreover, utilizing the CECP, we provide a refined classification of the monthly price dynamics and obtain an insight into the stochastic nature of price series. The results uncover that the spot price signal presents diverse temporal correlations and exhibits a higher stochastic behavior during the periods of crisis.


1996 ◽  
Vol 39 (4) ◽  
Author(s):  
Y. Tulunay

Using critical frequencies, f0F2 from the Lannion, Slough, Poitiers, Garchy, Dourbes, Rome, Juliusrud, Gibilmanna, Pruhonice, Uppsala, Kaliningrad, Miedzeszyn, Sofia, Athens and Kiev ionosonde stations, the possible effects of the orientation of the Interplanetary Magnetic Field (IMF) on mid-latitude ionosphere are further investigated. This time, only the southward polarity changes in IMF Bz with seasonal effects were considered. The same method of analysis was employed to facilitate a comparison between the recent results presented here with those which appeared in the preceding papers in the series. That is, the regular diurnal, seasonal and solar cycle variations in the f0F2 data were removed by subtracting the mean of the f0F2 for the same UT on all magnetically quite days (Ap < 6) within 15 days around the IMF Bz turnings (Tulunay, 1994). This last paper also includes the seasonal effects on the ionospheric data. The results confirm that much of the day-to-day variability of the mid-latitude ionosphere may be related to the orientation of the southward IMF Bz , characterized by the ionospheric winter anomaly. Day-to-day ionospheric variability becomes more significant towards higher latitudes.


2020 ◽  
Vol 12 (10) ◽  
pp. 4267 ◽  
Author(s):  
Jannik Schütz Roungkvist ◽  
Peter Enevoldsen ◽  
George Xydis

Energy markets with a high penetration of renewables are more likely to be challenged by price variations or volatility, which is partly due to the stochastic nature of renewable energy. The Danish electricity market (DK1) is a great example of such a market, as 49% of the power production in DK1 is based on wind power, conclusively challenging the electricity spot price forecast for the Danish power market. The energy industry and academia have tried to find the best practices for spot price forecasting in Denmark, by introducing everything from linear models to sophisticated machine-learning approaches. This paper presents a linear model for price forecasting—based on electricity consumption, thermal power production, wind production and previous electricity prices—to estimate long-term electricity prices in electricity markets with a high wind penetration levels, to help utilities and asset owners to develop risk management strategies and for asset valuation.


2019 ◽  
Vol 40 (Supplement_1) ◽  
Author(s):  
E Atkins ◽  
Q Pilard ◽  
K Rogers ◽  
A Salam ◽  
A Rodgers

Abstract Background There is evidence that blood pressure (BP) levels vary considerably from season to season, due principally to variation in ambient temperature. This gives the potential for both under- and over-treatment if BP lowering medications are not varied seasonally, but is not acknowledged in clinical guidelines. We will describe the seasonal variation in BP and assess the association between systolic blood pressure (SBP) and outdoor maximum ambient temperature in Australia. Methods The primary care data is an extract from MedicineInsight, a national general practice data program developed and managed by NPS MedicineWise, which extracts deidentified data from almost 10% of all Australian general practices. We included patients aged 30–90 years with at least one BP measure recorded from 1 Jan 2010 to 1 Aug 2017. Australian Bureau of Meteorology daily max temperature is linked by matching observation dates and location to nearest weather station. Decomposition of the mean will determine seasonal variation. Multiple linear regression was used to estimate the associations between max temperature and SBP with adjustment for age, sex, socioeconomic index, current smoking, comorbidities, BP lowering medication use, lipid lowering medication use and year of BP measurement. Results The study population includes 2.6 million people, mean age 55 years (standard deviation [SD] 16.3). Fifty-five percent are female, over a third of the cohort reside in New South Wales, and 62.4% reside in major Australian cities. The mean (SD) temperature was 23°C (6.6). There was a mean (SD) of 7 (11.4) BP measurements per person over the study period, median 3 measures (interquartile range 1–8). A quarter had a history of hypertension, 8% had a history of cardiovascular disease, and 8% had a history of diabetes. Twenty-six percent had at least one prescription for BP lowering therapy. The average monthly SBP for the cohort demonstrated strong seasonal variation with higher values in winter. The population mean varies by 3mmHg SBP between seasons across Australia, ranging from 1.7mmHg in the Northern Territory to 3.5mmHg in South Australia (range of mean maximum temperature 3°C [30–33] and 14°C [15–29] for the capital cities respectively). Each 10°C increase in max outdoor temperature was associated with a 1.8mmHg [95% CI 1.80–1.83] lower mean SBP. The proportion of people with SBP>140mmHg varied by season, irrespective of age, sex and use of BP lowering treatment. For example, among those treated control rates varied between 70 and 81%, and among those not treated between 78 and 85% (Figure). Blood pressure seasonality in Australia Conclusions BP control rates vary considerably by season. These findings have implications for the reliable diagnosis of hypertension, and suggest seasonal adjustments in treatment should be considered for some patients. The clinical and public health relevance of this phenomenon is expected to increase with increasing climate variability. Acknowledgement/Funding National Health and Medical Research Council Australia, National Heart Foundation Australia


2015 ◽  
Vol 02 (01) ◽  
pp. 1550005 ◽  
Author(s):  
Aparna Gupta ◽  
Koushik Kar ◽  
Praveen K. Muthuswamy

We propose a secondary spectrum market that allows wireless providers to purchase spectrum access licenses of short duration in the form of spot contracts and derivative contracts on spectrum. A spot contract provides immediate access to one or more wireless channels and cannot be further traded. On the other hand, derivative contracts on spectrum typically involve purchase of spectrum licenses in the future for predefined terms, and they can play an important role in risk management objectives of wireless providers. In this paper, we utilize a model for the spot price of spectrum licenses in which the price increases with increasing congestion in spectrum usage caused by the primary demand for spectrum. The spot price process, modeled as driven by a fractional Brownian motion (fBm) process to capture the self-similarity properties of wireless traffic, is utilized in fractional stochastic calculus to obtain the value of derivative contracts. We design a variety of derivative contracts considering the risk profile of both the buyers and sellers of spectrum. Through a detailed numerical study, we examine the value of these derivative contracts for changes in spot price volatility and the parameters that define the contracts.


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