Abstract
Since the deregulation of electricity, new models were needed to quantify the price of contracts with speci ed delivery period of electricity. In this thesis we have looked at two such models. The rst model is given in [6], here the electricity price is modeled as a sum of log-normal forwards. The main concern was how the swap price and log-returns of the electricity price would behave, given the log-normal forwards.
Secondly we compare the above model for electricity prices, with a second model for electricity prices given by [9]. The comparison is interesting, since the second model makes an approximation to the electricity price which is not consistent with what the mathematics tell us.
And nally we simulate a call option price with each model as underlying.
We have observed di erences in the swap price paths and log-returns estimated by the two models. Because of the di erence price paths, the price of the call option gave di erent values.