Pricing Wind Power Futures

Abstract With increasing wind power (WP) penetration an extensive amount of volatile and weather dependent energy is fed into the German electricity system. To manage volume risk windless days transfer revenue from turbine owners to investors, WP derivatives were introduced. These insurance-like securities allow hedging unstable production on exchanges such as NASDAQ EEX. We present a modern powerful methodology model derivatives, with very skewed underlying assets, incorporating techniques extreme event modelling tune seasonal volatility. compare transformed Gaussian non-Gaussian CARMA(p, q) models. Our results indicate that preferred over alternative. Out-of-sample backtesting show good performance, respect benchmarks, employing smooth market price (MPR) estimates based weekly monthly futures prices. A MPR smile shape observed, slightly positive values in times high volatility, for example, winter months, negative values, low volatility production, summer months. conclude producers pay premiums insure stable steams, while investors when high.