Three Essays in Energy Economics

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dc.contributor.advisorHartley, Peter R.en_US
dc.contributor.committeeMemberMedlock, Kenneth B., IIIen_US
dc.contributor.committeeMemberFleming, Jeffen_US
dc.contributor.committeeMemberKaminski, Vincenten_US
dc.creatorLi, Jianghuaen_US
dc.date.accessioned2012-09-05T23:50:25Zen_US
dc.date.accessioned2012-09-05T23:50:28Zen_US
dc.date.available2012-09-05T23:50:25Zen_US
dc.date.available2012-09-05T23:50:28Zen_US
dc.date.created2012-05en_US
dc.date.issued2012-09-05en_US
dc.date.submittedMay 2012en_US
dc.date.updated2012-09-05T23:50:28Zen_US
dc.description.abstractThis thesis includes three chapters on electricity and natural gas prices. In the first chapter, we give a brief introduction to the characteristics of power prices and propose a mean reversion jump diffusion model, in which jump intensity depends on temperature data and overall system load, to model electricity prices. Compared to the models used in the literature, we find the model proposed in this chapter is better to capture the tail behavior in the electricity prices. In the second chapter, we use the model proposed in the first chapter to simulate the spark spread option and value the power generations. In order to simulate power generation, we first propose and estimate mean reversion jump diffusion model for natural gas prices, in which jump intensity is defined as a function of temperature and storage. Combing the model with the electricity models in chapter 1, we find that the value of power generation is closer to the real value of the power plants as reflected in the recent market transaction than one obtains from many other models used in literature. The third chapter investigates extremal dependence among the energy market. We find a tail dependence that exceeds the Pearson correlation ρ, which means the traditional Pearson correlation is not appropriate to model tail behavior of oil, natural gas and electricity prices. However, asymptotic dependence is rejected in all pairs except Henry Hub gas return and Houston Ship Channel gas return. We also find that extreme value dependence in energy market is stronger in bull market than that in bear market due to the special characteristics in energy market, which conflicts the accepted wisdom in equity market that tail correlation is much higher in periods of volatile markets from previous literature.en_US
dc.format.mimetypeapplication/pdfen_US
dc.identifier.citationLi, Jianghua. "Three Essays in Energy Economics." (2012) Diss., Rice University. <a href="https://hdl.handle.net/1911/64606">https://hdl.handle.net/1911/64606</a>.en_US
dc.identifier.slug123456789/ETD-2012-05-44en_US
dc.identifier.urihttps://hdl.handle.net/1911/64606en_US
dc.language.isoengen_US
dc.rightsCopyright is held by the author, unless otherwise indicated. Permission to reuse, publish, or reproduce the work beyond the bounds of fair use or other exemptions to copyright law must be obtained from the copyright holder.en_US
dc.subjectMean reversion jump diffusion modelen_US
dc.subjectSpark spread optionen_US
dc.subjectCorrelationen_US
dc.titleThree Essays in Energy Economicsen_US
dc.typeThesisen_US
dc.type.materialTexten_US
thesis.degree.departmentEconomicsen_US
thesis.degree.disciplineSocial Sciencesen_US
thesis.degree.grantorRice Universityen_US
thesis.degree.levelDoctoralen_US
thesis.degree.nameDoctor of Philosophyen_US
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