Dear Colleagues,
I would like to let you know about my recently published paper on the applications of my non-Markovian approach to modeling positive and negative energy/commodity spots, forwards and swaps with upward and downward spikes that might be of interest to you:
[1] V. A. Kholodnyi, "Modeling power forward prices for power spot prices with upward and
downward spikes in the framework of the non-Markovian approach," Journal of
Mathematics in Engineering, Science and Aerospace, Vol. 2, No. 2, pp. 105-120, 2011.
Abstract: As power markets are becoming deregulated worldwide, the modeling of the dynamics of
power forward prices is becoming a key problem in energy risk management, physical assets valuation
and derivatives pricing.
In this paper we present and further develop a new approach to modeling power spot prices with
spikes proposed earlier by the author. In contrast to other approaches, we model power spot prices
with spikes as a non-Markovian stochastic process that allows for a unified modeling of positive and
negative power spot prices as well as upward and downward spikes directly as self-reversing jumps.
We show how this approach can be used for a unified modeling of positve and negative power forward
prices for positive and negative power spot prices with upward and downward spikes in the practically
important special case of the upward and downward Pareto distributions for the magnitude of upward
and downward spikes.
Please let me know if you might have questions or would like additional information.
Sincerely,
Valery Kholodnyi
