AMBIT FIELDS VIA FOURIER METHODS IN THE CONTEXT OF POWER MARKETS

Abstract

In their paper Barndorff-Nielsen, Benth and Veraart employ so called Ambit fields to model electricity spot-forward dynamics. We briefly introduce and discuss Ambit fields in the setting of modelling electricity forward markets, and introduce a novel method for approximating general ambit fields by a linear combination of ambit fields driven by exponential kernel functions (as has already been done in the null-spatial case of Levy semistationary processes by Benth, Eyjolfsson and Veraart) by representing the deterministic kernel function as an integral over its Fourier domain. Moreover we shall study examples of ambit fields with ill behaved kernel functions to illustrate the usefulness of our method for pricing purposes.