Optimal Portfolio and Consumption in Anticipative Electricity Futures Markets

22 Pages Posted: 5 Aug 2014 Last revised: 7 Sep 2014

See all articles by Markus Hess

Markus Hess

RPTU Kaiserslautern-Landau

Date Written: September 7, 2014

Abstract

We derive utility maximizing portfolios and consumption rates in electricity futures markets under anticipative information modeled by enlarged filtrations. The emerging optimization exercises are solved by point-wise maximization and a sufficient stochastic maximum principle. We provide rigorous economical interpretation of our mathematical results and distinguish optimal trading behavior for small and large investors with insider knowledge. On the mathematical side we are concerned with jump processes, (B)SDEs, enlarged filtrations, forward integrals, stochastic maximum principles and Malliavin calculus.

Keywords: anticipative stochastic calculus, enlargement of filtration, forward integral, insider trading, forward-looking information, electricity futures market, portfolio selection, consumption rates, utility maximization

JEL Classification: C00, D52, D81, D82, G11, G13

Suggested Citation

Hess, Markus, Optimal Portfolio and Consumption in Anticipative Electricity Futures Markets (September 7, 2014). Available at SSRN: https://ssrn.com/abstract=2475826 or http://dx.doi.org/10.2139/ssrn.2475826

Markus Hess (Contact Author)

RPTU Kaiserslautern-Landau ( email )

Kaiserslautern, 67663
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
111
Abstract Views
623
Rank
444,645
PlumX Metrics