Applications of Mean-reverting Processes in Alberta Energy Markets
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2020-09-21
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Abstract
This thesis introduce fuel-switching price, which designed for encouraging power plant companies to switch from coal to natural gas when they produce electricity and successfully applied on European market, to Albertan Market. Moreover, we consider a energy-switching price which consider power switch from natural gas to wind. We modeled these two prices using five mean reverting processes including Regime-switching processes, Lévy-driven Ornstein-Uhlenbeck process and Inhomogeneous Geometric Brownian Motion, and estimate them based on multiple procedures such as Maximum likelihood estimation and Expectation-Maximization algorithm. At last, this thesis prove previous result applied on Albertan Market that the jump modeling techniques is needed when modeling fuel-switching data. In addition, it not only give promising conclusion on the necessity of introducing Regime-switching models to the fuel-switching data, but also show that Regime-switching model is better fitted to the data.
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Lu, W. (2020). Applications of Mean-reverting Processes in Alberta Energy Markets (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.