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2024 | OriginalPaper | Buchkapitel

Estimation of the Number of Factors in a Multi-Factorial Heath-Jarrow-Morton Model in Power Markets

verfasst von : Olivier Féron, Pierre Gruet

Erschienen in: Quantitative Energy Finance

Verlag: Springer Nature Switzerland

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Abstract

We study the calibration of specific multi-factorial Heath-Jarrow-Morton models to power market prices, with a focus on the estimation of the optimal number of Gaussian factors. We describe a common statistical procedure based on likelihood maximisation and Akaike/Bayesian information criteria, in the case of a joint calibration on both spot and futures prices. We perform a detailed analysis on three national markets within Europe: Belgium, France, and Germany. The results show a lot of similarities among all the markets we consider, especially on the optimal number of factors and on the behaviour of the different factors.

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Nächstes Kapitel Hawkes Processes in Energy Markets: Modelling, Estimation and Derivatives Pricing

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In practice the number of observed prices may vary, even after removing the redundant products (e.g. a quarterly contract when all the corresponding monthly contracts are observed), see Sect. 4.1.

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Titel: Estimation of the Number of Factors in a Multi-Factorial Heath-Jarrow-Morton Model in Power Markets
verfasst von: Olivier Féron
Pierre Gruet
Verlag: Springer Nature Switzerland
Buch: Quantitative Energy Finance
Print ISBN: 978-3-031-50596-6

Electronic ISBN: 978-3-031-50597-3

Copyright-Jahr: 2024
DOI: https://doi.org/10.1007/978-3-031-50597-3_1

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