MATHEMATICAL MODEL OF THE ELECTRICITY PRICES ON THE SPOT MARKET

Abstract

The price on the electricity market is constantly changing. Owing to the characteristics of electricity market the future movement of the price is relatively hard to predict. For this reason the following three processes are applied: the process of the future electricity price movement according to the geometric Brownian motion, the mean reversion process, and the price spikes process. The paper discusses all three processes, including their definitions, formulas and applications, as well as their upsides and downsides.