An Introduction to Models for the Energy Markets
The special physical characteristics of commodities such as electricity, natural gas and oil mean that standard pricing models applied in financial markets for risk management and valuation purposes cannot simply be transferred and used as energy pricing models.
An Introduction to Models for the Energy Markets provides a clear exposition of the thinking behind the range of models used today in energy finance.
Transportation, storage, seasonality and settlement issues hardly figure in financial markets and their modelling. Yet, they are crucial to the working of energy markets and, as a result, traditional financial models must be customised to give useful results.
More broadly, traders and portfolio managers, who make crucial decisions based on the output of these models, should be familiar with their power and their limitations.
Ronald Huisman has combined both academic and practical approaches in An Introduction to Models for the Energy Markets to provide the reader with a clear exposition of the thinking behind the range of models used today in energy finance - from the most basic to the cutting edge. In each chapter, a series of case-study examples offers the reader practical examples of the models’ application as well as insights into extension and development.
An Introduction to Models for the Energy Markets is an essential purchase for all risk and portfolio managers, analysts and researchers for energy companies, banks and energy investment companies. It will also be required reading for students and academic researchers in the energy area.
|Publication date||3 Aug 2009|
|Size||155mm x 235mm|
List of Figures
List of Tables
About the Author
1 Data Analysis
Summary statistics: average and standard deviation
Summary statistics: skewness and kurtosis
Why do we need models if we have distributions?
What to model: actual prices or log prices?
3 Standard Models for Prices and Volatility
Characteristics of energy prices
Mean-reversion models for energy prices
4 Beyond Mean Reversion
Modelling price spikes
5 Factor Models for Forward Prices
The information embedded in forward prices
The Kalman filter
Estimating the parameters in a long-term–short-term model
Any other factors?
6 Extreme Value Theory
Estimation procedure for the tail index
7 Methods for Valuing Real Options
Real options in energy contracts and real assets
Black–Scholes related formulas
A power plant as an option
Option valuation with trees
Incorporating operational constraints
Least Squares Monte Carlo