Bryan R. Routledge / Carnegie Mellon University

	The spark spread: An equilibrium model of cross-commodity price relationships in electricity
	Bryan R. Routledge, Carnegie Mellon University Duane J. Seppi, Carnegie Mellon University Chester S. Spatt, Carnegie Mellon University
	May 2001 Working Paper
	ABSTRACT This paper presents a simple competitive rational expectations model of spot and forward prices for "upstream" (e.g., electricity) and "downstream" commodities (e.g., natural gas and other fuels). We show that many of the most intriguing empirical features of electricity prices -- such as mean reversion, price-dependent heteroscedasticity, skewness, unstable electricity/fuel correlations -- follow naturally from the underlying economics of supply and demand.
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	Data updated: 05.11.2004 10:32

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