Post by Sapphire Capital on Aug 21, 2008 22:45:14 GMT 4
A Semiparametric Factor Model for Electricity Forward Curve Dynamics
Szymon Borak
Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)
Rafal Weron
Wroclaw University of Technology
Journal of Energy Markets, Forthcoming
Abstract:
In this paper we introduce the dynamic semiparametric factor model (DSFM) for electricity forward curves. The biggest advantage of our approach is that it not only leads to smooth, seasonal forward curves extracted from exchange traded futures and forward electricity contracts, but also to a parsimonious factor representation of the curve. Using closing prices from the Nordic power market Nord Pool we provide empirical evidence that the DSFM is an efficient tool for approximating forward curve dynamics.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1168052_code451752.pdf?abstractid=1168052&mirid=1
Szymon Borak
Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)
Rafal Weron
Wroclaw University of Technology
Journal of Energy Markets, Forthcoming
Abstract:
In this paper we introduce the dynamic semiparametric factor model (DSFM) for electricity forward curves. The biggest advantage of our approach is that it not only leads to smooth, seasonal forward curves extracted from exchange traded futures and forward electricity contracts, but also to a parsimonious factor representation of the curve. Using closing prices from the Nordic power market Nord Pool we provide empirical evidence that the DSFM is an efficient tool for approximating forward curve dynamics.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1168052_code451752.pdf?abstractid=1168052&mirid=1