Markov Chain Monte Carlo Estimation of a Multi-Factor Jump Diffusion Model for Power Prices
In this paper we generalize the electricity spot price model of Lucia and Schwartz by a two-factor model with jumps and stochastic volatility. We estimate the model on daily spot price data from the Nordic market using an approach that combines traditional statistical methods with a Markov chain Monte Carlo algorithm. Results show that the model captures most of the trajectorial and the statistica