Talks in the Winter Term 19/20

Talks in the winter term 19/20 normally will take place on wednesdays in the time between 6pm and 8pm in room S06 S00 A21 at Campus Essen (Directions).

Dates and Lecturers:

13.11.2019: Dr. Maren Schmeck, University of Bielefeld

On the Seasonality in the Implied Volatility of Electricity Options

Abstract:

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. 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.