Stochastic Modeling of Power Markets Using Stationary Processes

We make a survey over recent developments in stochastic modelling of power markets, with a particular focus on the application of stationary processes. We analyse the class of Levy semistationary processes proposed by Barndorff-Nielsen, Benth and Veraart [1] for modelling electricity spot prices. We suggest and analyse different numerical methods for simulating the paths of these processes, a particulary important question for risk management studies in power markets. Finally, we discuss the aspect of pricing forward contracts based on a class of stationary models, and review some implications.