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- A Non-Markovian Process for Power Prices with Spikes and Valuation of European Contingent Claims on Power
A Non-Markovian Process for Power Prices with Spikes and Valuation of European Contingent Claims on Power
- By Valery Kholodnyi
- Published 12/21/2007
- Price modeling
- Unrated
Valery Kholodnyi
Executive Director of the Center for Quantitative Risk Analysis
PhD in Applied Mathematics from the Moscow Institute of Electronics and Mathematics in 1990. Served as Director of Research for TXU Energy Trading; Director of Quantitative Analysis for Reliant Energy; Chief Science Officer and VP of R&D for Integrated Energy Services.
View all articles by Valery KholodnyiWe propose a new natural approach to modeling spikes in power prices based on a non-Markovian process. In contrast to the standard approaches we model spikes directly as self-reversing jumps. We also show how this approach can be used to value European contingent claims on power with spikes.
