Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323572 
Year of Publication: 
2025
Citation: 
[Journal:] Mathematics and Financial Economics [ISSN:] 1862-9660 [Volume:] 19 [Issue:] 2 [Publisher:] Springer Berlin Heidelberg [Place:] Berlin/Heidelberg [Year:] 2025 [Pages:] 293-327
Publisher: 
Springer Berlin Heidelberg, Berlin/Heidelberg
Abstract: 
Abstract In this paper, we extend the market price of risk for delivery periods (MPDP) of electricity swap contracts by introducing a dimension for jump risk. As introduced by Kemper et al. [ 30 ], the MPDP arises through the use of geometric averaging while pricing electricity swaps in a geometric framework. We adjust the work by Kemper et al. [ 30 ] in two directions: First, we examine a Merton type model taking jumps into account. Second, we transfer the model to the physical measure by implementing mean-reverting behavior. We compare swap prices resulting from the arithmetic (approximated) average to the geometric weighted average. Under the physical measure, we discover a decomposition of the swap’s market price of risk into the instantaneous market price of risk and the MPDP.
Subjects: 
Electricity swaps
Delivery period
MPDP for diffusion and jump risk
Mean-reversion
Jumps
Samuelson effect
Seasonality
Persistent Identifier of the first edition: 
Additional Information: 
G130;Q400
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version
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