The price of power: The valuation of power and weather derivatives

Journal of Banking and Finance

Volumn 32, Issue 12, 2008, Pages 2520-2529

  Pirrong, Craig ^a   Jermakyan, Martin ^b  

^a UNIVERSITY OF HOUSTON   (United States)

^b ElectraPartnerscom ^*

Author keywords

Derivatives pricing; Electricity markets; Inverse techniques; Market price of risk

Indexed keywords

EID: 55349107235     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2008.04.007     Document Type: Article

References (24)

1. Back K., and Zender J. Auctions of divisible goods: On the rationale of the treasury experiment. Review of Financial Studies 6 (1993) 733-764
2. Barone-Adesi, G., Gigli, A., 2002. Electricity derivatives. Working paper, Universita della Svizzera Italiana.
3. Bessimbinder H., and Lemmon M. Equilibrium pricing and optimal hedging in electricity forward markets. Journal of Finance (2002) 57
4. Eydeland A., and Geman H. Fundamentals of electricity derivatives. In: Jameson R. (Ed). Energy Modelling and the Management of Uncertainty (1999), Risk Publication, London
5. Eydeland A., and Wolyniec K. Energy and power risk management: new developments in modeling pricing and hedging (2002), John Wiley and Sons, New York
6. Geman H. The Bermuda triangle: weather, electricity, and insurance derivatives. Journal of Alternative Investments 3 (2000)
7. Geman, H., 2005. Commodities and commodity derivatives: modeling and pricing for agriculturals, Metals, and Energy. West Sussex: Wiley Finance.
8. Geman H., and Roncoroni A. Understanding the fine structure of electricity prices. Journal of Business (2006) 79
9. Geman H., and Vasicek O. Forward and futures contracts on non-storable commodities: the case of electricity. Risk (2001) August
10. Green R.J., and Newbery D. Competition in the British electric spot market. Journal of Political Economy (1992) 100
11. Harrison M.J., and Taksar M. Instantaneous control of Brownian motion. Mathematics of Operations Research (1983)
12. Hortascu, A., Puller, S., 2005. Understanding strategic bidding in restructured electricity markets: A case study of ERCOT. NBER Working Paper 11123.
13. Johnson B., and Barz G. Selecting stochastic processes for modelling electricity prices. In: Jameson R. (Ed). Energy Modelling and the Management of Uncertainty (1999), Risk Publication, London
14. Merton R. The theory of rational options pricing. Bell Journal of Economics and Management Science 4 (1973) 141-183
15. Newbery D. Power markets and market power. Energy Journal 16 (1995)
16. Pirrong, C., 2006a. Incorporating Outages into the Pirrong-Jermakyan Framework. Working paper, University of Houston.
17. Pirrong, C., 2006b. The Valuation of Power Options in a Pirrong-Jermakyan Framework. Working Paper, University of Houston.
18. Ronn, E., Dincerler, C., 2001. Risk Premia and Price Dynamics in Power Markets. Working paper, University of Texas.
19. Rudkevich A., and Duckworth M. Strategic bidding in a deregulated generation market: implications for electricity prices, asset valuation, and regulatory response. Electricity Journal (1998)
20. Tikhinov A., and Arsenin V. Solution of Ill-posed Problems (1977), Halsted Press, New York
21. Villaplana, P., 2004. A Two-state Variables Model for Electricity Prices, Third World Congress of the Bachlier Finance Society, Chicago.
22. Wang A., and Longstaff F. Electricity forward prices: a high frequency empirical analysis. Journal of Finance 59 (2004)
23. Wolak, F., Patrick, R., 1997. The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market. Working paper, Stanford University.
24. Wolfram C. Measuring duopoly power in the British electricity spot market. American Economic Review 89 (1999) 805-826