On the Seasonality in the Implied Volatility of Electricity Options
| Autor: | Maren Diane Schmeck, Viviana Fanelli |
|---|---|
| Rok vydání: | 2018 |
| Předmět: |
Implied volatility
Factor models Supply and demand 0502 economics and business Economics Econometrics medicine Electricity options 050207 economics Season cycle Factor analysis 050208 finance business.industry 05 social sciences Settlement prices Seasonality medicine.disease Maturity (finance) Electricity Volatility (finance) business General Economics Econometrics and Finance Futures contract Finance |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.3176590 |
| Popis: | Seasonality is an important topic in electricity markets, as both supply and demand are dependent on the time of the year. Clearly, the level of prices shows a seasonal behaviour, but not only this. Also, the price fluctuations are typically seasonal. In this paper, we study empirically the implied volatility of options on electricity futures, investigate whether seasonality is present and we aim at quantifying its structure. Although typically futures prices can be well described through multi-factor models including exponentially decreasing components, we do not find evidence of exponential behaviour in our data set. Generally, a simple linear shape reflects the squared volatilities very well as a curve depending on the time to maturity. Moreover, we find that the level of volatility exhibits clear seasonal patterns that depend on the delivery month of the futures. Furthermore, in an out-of-sample analysis we compare the performance of several implementations of seasonality in the one-factor framework. |
| Databáze: | OpenAIRE |
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