Journal of Energy Markets
ISSN:
1756-3607 (print)
1756-3615 (online)
Editor-in-chief: Derek W. Bunn
Modeling natgas intramonth spot (daily or “cash”) price movements
Ehud I. Ronn
Abstract
ABSTRACT
This paper presents a specific modeling relationship between spot (day-ahead, or "cash" prices) and the prompt-month futures contract in the natural gas (natgas) market. Under the mean-reverting model considered here, the paper documents the seasonally dependent comovement between spot and futures prices, presents both ex ante and ex post measures of the pricing bias and derives theoretical and empirical results for the valuation of intramonth natgas derivative structures.
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