Polynomial Processes for Power Prices

@article{Ware2019PolynomialPF,
  title={Polynomial Processes for Power Prices},
  author={T. Ware},
  journal={Applied Mathematical Finance},
  year={2019},
  volume={26},
  pages={453 - 474}
}
  • T. Ware
  • Published 1 October 2017
  • Mathematics
  • Applied Mathematical Finance
ABSTRACT Polynomial processes have the property that expectations of polynomial functions (of degree n, say) of the future state of the process conditional on the current state are given by polynomials (of degree ≤ n) of the current state. Here we explore the potential of polynomial maps of polynomial processes for modelling energy prices. We focus on the example of Alberta power prices, derive one- and two-factor models for spot prices. We examine their performance in numerical experiments… 
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