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Futures risk premium characterization and spot price modeling on the German electricity market

Lindéus, Gustav LU (2015) NEKH01 20151
Department of Economics
Abstract
In this thesis it was investigated how accurate the futures predict the spot prices and characterizing the futures risk premium on the German electricity market, which currently undergoes an energy transition. This was conducted twice, with realized data and with data from an own developed model. The realized spot price data and futures were obtained from the European Energy Exchange. The methodology to develop the model was according to conventional financial time series modeling. First, the data was converted from nonstationary to stationary. Then, Box & Jenkins modeling and Akaike information and Schwartz Bayesian criteria were used to determine the lags in the subsequent ARMA model. The model was chosen
to be an ARMA(1,1) model. Its... (More)
In this thesis it was investigated how accurate the futures predict the spot prices and characterizing the futures risk premium on the German electricity market, which currently undergoes an energy transition. This was conducted twice, with realized data and with data from an own developed model. The realized spot price data and futures were obtained from the European Energy Exchange. The methodology to develop the model was according to conventional financial time series modeling. First, the data was converted from nonstationary to stationary. Then, Box & Jenkins modeling and Akaike information and Schwartz Bayesian criteria were used to determine the lags in the subsequent ARMA model. The model was chosen
to be an ARMA(1,1) model. Its parameters were estimated with the maximum-likelihood method and then a 1-step forecasting method was applied to generate data points. Both the realized data and the data from the model, together with the relevant futures, suggest that there is a positive risk premium. This is consistent with financial research. Regarding the accuracy measures, the uncertainty tended to increase gradually for the realized values, meanwhile the model based ones generated a non-consistent pattern. (Less)
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author
Lindéus, Gustav LU
supervisor
organization
course
NEKH01 20151
year
type
M2 - Bachelor Degree
subject
keywords
Spot price modeling, futures, electricity markets, Energiewende, risk premium
language
English
id
7851593
date added to LUP
2015-09-14 14:26:15
date last changed
2015-09-14 14:26:15
@misc{7851593,
  abstract     = {In this thesis it was investigated how accurate the futures predict the spot prices and characterizing the futures risk premium on the German electricity market, which currently undergoes an energy transition. This was conducted twice, with realized data and with data from an own developed model. The realized spot price data and futures were obtained from the European Energy Exchange. The methodology to develop the model was according to conventional financial time series modeling. First, the data was converted from nonstationary to stationary. Then, Box & Jenkins modeling and Akaike information and Schwartz Bayesian criteria were used to determine the lags in the subsequent ARMA model. The model was chosen
to be an ARMA(1,1) model. Its parameters were estimated with the maximum-likelihood method and then a 1-step forecasting method was applied to generate data points. Both the realized data and the data from the model, together with the relevant futures, suggest that there is a positive risk premium. This is consistent with financial research. Regarding the accuracy measures, the uncertainty tended to increase gradually for the realized values, meanwhile the model based ones generated a non-consistent pattern.},
  author       = {Lindéus, Gustav},
  keyword      = {Spot price modeling,futures,electricity markets,Energiewende,risk premium},
  language     = {eng},
  note         = {Student Paper},
  title        = {Futures risk premium characterization and spot price modeling on the German electricity market},
  year         = {2015},
}