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Electricity Derivatives


Giovanni Barone-Adesi


Swiss Finance Institute at the University of Lugano; Swiss Finance Institute

Andrea Gigli


Universita della Svizzera Italiana - Institute of Finance
October 16, 2002


Abstract:     
In this paper we propose an algorithm for pricing derivatives written on electricity in an incomplete market setting. A discrete time model for price dynamics which embodies the main features of electricity price revealed by simple time series analysis is considered. We use jointly Binomial and Monte Carlo methods for pricing under a risk-neutral measure of which we prove the existence.

Number of Pages in PDF File: 15

Keywords: Electricity derivatives, risk-neutral valuation

JEL Classification: G1

working papers series


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Date posted: May 7, 2002  

Suggested Citation

Barone-Adesi, Giovanni and Gigli, Andrea, Electricity Derivatives (October 16, 2002). Available at SSRN: http://ssrn.com/abstract=310819 or http://dx.doi.org/10.2139/ssrn.310819

Contact Information

Giovanni Barone-Adesi (Contact Author)
Swiss Finance Institute at the University of Lugano ( email )
Via Buffi 13
CH-6904 Lugano
Switzerland
+41 58 666 4671 (Phone)
+41 58 666 46 47 (Fax)
Swiss Finance Institute
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
Andrea Gigli
Universita della Svizzera Italiana - Institute of Finance ( email )
Via G. Buffi, 13
CH-6900 Lugano
Switzerland
+41 91 9124660 (Phone)
+41 91 9124734 (Fax)
Feedback to SSRN (Beta)


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