Identification of electricity spot models by using convolution particle filter

ShinIchi Aihara, Arunabha Bagchi, E.S.N. Imreizeeq

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    Abstract

    We consider a slight perturbation of the Schwartz-Smith model for the electricity futures prices and the resulting modied spot model. Using the martingale property of the modied price under the risk neutral measure, we derive the arbitrage free model for the spot and futures prices. As the futures price formula is based on the arithmetic average of the unobservable spot prices, it is highly nonlinear. We use the particle filtering methodology for estimating the model parameters. The main advantage of the new model is that it avoids the inclusion of articial noise to the observation equation for the implementation of the particle lter. The extra noise is built within the model in an arbitrage free setting.
    Original languageUndefined
    Pages (from-to)61-72
    Number of pages12
    JournalInternational journal of innovative computing, information and control
    Volume7
    Issue number1
    Publication statusPublished - 2011

    Keywords

    • Parameter estimation
    • Electricity spot model
    • Particle lter
    • EWI-22282
    • Particle filter
    • Kalman lter
    • Kalman filter
    • Maximum likelihood estimators
    • Finance
    • IR-81542
    • MSC-91G80

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