Modelling electricity price and determination of the futures price.

We discuss the characteristics of the electricity and its price in order to find suitable models for the specification of the fair futures price. The non-storability feature makes this commodity different from the others bringing several consequences in the determination of its price. Another difference with other commodities is that electricity has regional markets instead of global markets due to the fact that it is not simple to transport energy. It is also linked to other commodities such as natural gas because electricity can be produced from other sources of energy, and of course, this contributes to the formation of power prices. The consumption of electricity is also linked to the weather, so its usage is conditional to the seasons, implying evidence of seasonality in its time series. All these interesting features forced the researchers to find appropriate models to explain the behaviour of electricity spot prices because these models can be used for the determination of the forward prices. In this thesis we analyse the characteristics of electricity and its price, we discuss some of the models used in literature for the power price and the models to determine a fair futures price. The final part of the thesis is dedicated to the application of a model for the electricity spot price using real market data. Then, we want to determine if this model is a good choice for the determination of futures prices using futures contracts traded in the market.