UK gas markets: The market price of risk and applications to multiple interruptible supply contracts

Author: 

Cartea, A
Williams, T

Journal: 

Energy Economics

Publication Date: 

1 May 2008

Last Updated: 

2017-11-16T22:38:07.527+00:00

Issue: 

3

DOI: 

10.1016/j.eneco.2007.03.001

Volume: 

30

page: 

829-846

abstract: 

We employ the Schwartz and Smith [Schwartz, E., and J. Smith, 2000, Short-term variations and long-term dynamics in commodity prices, Management Science 46, 893-911.] model to explore the dynamics of the UK gas markets. We discuss in detail the short-term and long-term market prices of risk borne by the market players and how deviations from expected cyclical storage affect the short-term market price of risk. Finally, we illustrate an application of the model by pricing interruptible supply contracts that are currently traded in the UK. © 2007 Elsevier B.V. All rights reserved.

Symplectic id: 

624683

Submitted to ORA: 

Not Submitted

Publication Type: 

Journal Article