Estimation of the number of factors in a multi-factorial Heath-Jarrow-Morton model in electricity markets - Archive ouverte HAL Access content directly
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Estimation of the number of factors in a multi-factorial Heath-Jarrow-Morton model in electricity markets

Abstract

In this paper we study the calibration of specific multi-factorial Heath-Jarrow-Morton models to electricity market prices, with a focus on the estimation of the optimal number of factors. We describe a common statistical procedure based on likelihood maximisation and Akaike / Bayesian information criteria, in the case of calibration on futures prices, as well as on both spot and futures prices. We perform a detailed analysis on 6 European markets: Belgium, France, Germany, Italy, Switzerland and UK. The results show a lot of similarities on all the markets considered, especially on the optimal number of factors equal to 5; and on the behaviour of the different factors.
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Dates and versions

hal-02880824 , version 1 (25-06-2020)

Identifiers

  • HAL Id : hal-02880824 , version 1

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Olivier Feron, Pierre Gruet. Estimation of the number of factors in a multi-factorial Heath-Jarrow-Morton model in electricity markets. 2020. ⟨hal-02880824⟩
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