In this paper, it is shown how one can employ the wavelet analysis to reconstruct data based only on the subset of information that differentiates the two fundamentally related time series: spot and futures indices. Such an analysis allows researchers to focus on examining the relationship between the two price series. Furthermore, it also enables examination and comparison of reconstructed pri...

Starting from a simple supply/demand model for electricity, we obtain a diffusion (i.e. jumpless) model for spot prices which can exhibit ’price spikes’. We estimate the parameters in the model using historical data from the Alberta and California markets, and compare this model with some others used for spot prices.

With risk neutral traders and zero transaction costs, the expected value of the difference between the current forward price and the spot price of a commodity at the delivery date of the forward contract should be zero. Accounting for the transaction costs associated with trading in these two markets invalidates this result. We develop a statistical framework to test whether profitable trading ...

We propose and estimate fundamental models for natural gas prices. We compare how well these models, as well as univariate statistical time series models of NG prices and the NYMEX futures price for natural gas, forecast spot gas prices. We find that a univariate time series model that incorporates fundamental variables related to production, storage, weather, and aggregate output performs best...

This paper investigated the hedging effectiveness of crude palm oil futures market in Malaysia from January 2009 to June 2011 which traded under Bursa Malaysia Derivatives Berhad. Ordinary Least Squared (OLS) method was used to compute Minimum-Variance hedging ratio (MVHR), R-squared and hedging effectiveness by using daily data from settlement price of crude palm oil futures contracts and spot...

Regardless of the form of restructuring, deregulated electricity industries share one common feature: the absence of any significant, rapid demand-side response to the wholesale (or, spot market) price. For a variety of reasons, most electricity consumers still pay an average cost based regulated retail tariff held over from the era of vertical integration, even as the retailers themselves are ...

In this paper we apply Bayesian methods to estimate a stochastic volatility model using both the prices of the asset and the prices of options written on the asset. Implicit posterior densities for the parameters of the volatility model, for the latent volatilities and for the market price of volatility risk are produced. The method involves augmenting the data generating process associated wit...

In this paper we apply the recently developed fractionally cointegrated vector autoregressive (FCVAR) model to analyze price discovery in the spot and futures markets for five non-ferrous metals (aluminium, copper, lead, nickel, and zinc). The FCVAR model allows for long memory (fractional integration) in the equilibrium errors, and, following Figuerola-Ferretti and Gonzalo (2010), we allow for...

We analyze welfare and distributional properties of a two-settlement system consisting of a spot market over a two-node network and a single energy forward contract. We formulate and analyze several models which simulate joint dispatch of energy and transmission resources coordinated by a system operator. The spot market is subject to network uncertainty, which we model as a random capacity der...

Recently, cloud computing providers have started offering unused computational resources in the form of dynamically priced virtual machines (VMs), also known as “spot instances”. In spite of the apparent economical advantage, an intermittent nature is inherent to these biddable resources, which may cause VM unavailability. When an out-of-bid situation occurs, i.e. the current spot price goes ab...