Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195848
Authors: 
Benth, Fred Espen
Di Persio, Luca
Lavagnini, Silvia
Year of Publication: 
2018
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 6 [Year:] 2018 [Issue:] 2 [Pages:] 1-21
Abstract: 
We model the logarithm of the spot price of electricity with a normal inverse Gaussian (NIG) process and the wind speed and wind power production with two Ornstein-Uhlenbeck processes. In order to reproduce the correlation between the spot price and the wind power production, namely between a pure jump process and a continuous path process, respectively, we replace the small jumps of the NIG process by a Brownian term. We then apply our models to two different problems: first, to study from the stochastic point of view the income from a wind power plant, as the expected value of the product between the electricity spot price and the amount of energy produced; then, to construct and price a European put-type quanto option in the wind energy markets that allows the buyer to hedge against low prices and low wind power production in the plant. Calibration of the proposed models and related price formulas is also provided, according to specific datasets.
Subjects: 
energy markets
weather derivatives
quanto option
normal inverse Gaussian process
stochastic models for wind energy
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
Appears in Collections:

Files in This Item:
File
Size
543.47 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.