A survey of commodity markets and structural models for electricity prices

Rene A. Carmona, Michael Coulon

Research output: Chapter in Book/Report/Conference proceedingChapter

63 Scopus citations


The goal of this survey is to review the major idiosyncrasies of the commodity markets and the methods which have been proposed to handle them in spot and forward price models. We devote special attention to the most idiosyncratic of all: electricity markets. Following a discussion of traded instruments, market features, historical perspectives, recent developments and various modelling approaches, we focus on the important role of other energy prices and fundamental factors in setting the power price. In doing so, we present a detailed analysis of the structural approach for electricity, arguing for its merits over traditional reduced-form models. Building on several recent articles, we advocate a broad and flexible structural framework for spot prices, incorporating demand, capacity and fuel prices in several ways, while calculating closed-form forward prices throughout.

Original languageEnglish (US)
Title of host publicationQuantitative Energy Finance
Subtitle of host publicationModeling, Pricing, and Hedging in Energy and Commodity Markets
PublisherSpringer New York
Number of pages43
ISBN (Electronic)9781461472483
ISBN (Print)9781461472476
StatePublished - Jan 1 2014

All Science Journal Classification (ASJC) codes

  • General Economics, Econometrics and Finance
  • General Business, Management and Accounting


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