Stochastic Modelling for Energy Markets


Stochastic Modelling for Energy Markets 
Chair: Reg Kulperger (University of Western Ontario)
Organizer: Matt Davison (University of Western Ontario) 
[PDF]

MATT DAVISON, University of Western Ontario
Corn/Ethanol Price Spreads Emerging from an Inhomogeneous Set of Price-Influencing Ethanol Producers  [PDF]
 
There is some evidence that the recent trend towards producing ethanol from corn has induced a correlation between corn and ethanol prices that was not previously seen. Corn ethanol producers may be considered to hold a real exchange option between the two commodities. We examine a simple model of a set of corn ethanol producers, with different efficiencies, whose activities in the corn and ethanol markets influence prices in those markets. We assume the facilities start (or are idled) in ``merit order'' of efficiency and examine the prediction of such a model on corn/ethanol spreads. We close by presenting our progress toward discerning related patterns in actual market data. 
ANATOLIY SWISHCHUK, University of Calgary
Stochastic Modelling and Pricing of Energy Markets' Contracts with Local Stochastic Delayed and Jumped Volatilities  [PDF]
 
In this talk we study stochastic modelling and pricing of electricity, gas and temperature markets' contracts with delay and jumps, modelled by independent increments processes. The spot price models are based on a sum of non-Gaussian Ornstein-Uhlenbeck processes (including geometric and arithmetic models), describing the long- and short-term fluctuations of the spot dynamics. The models include jumps not only in the spot dynamics but also in the stochastic volatility to describe typical features like spikes of energy spot prices and jumps in the volatility. The basic products in these markets are spot, futures and forward contracts, swaps and options written on these, which will be investigated in our talk. 
HANS TUENTER, University of Toronto
Firming Wind Farm Revenues  [PDF]
 
Wind is an intermittent energy source and introduces randomness in a wind farm's power output and revenues. We show how tailored financial products, such as production puts or swaps, can increase the economic viability of a wind farm. To price these products, we use historical simulation of wind speed in combination with a power curve. A case study will be presented to illustrate the approach.