Electric Power Derivative Product's Pricing Analysis Based On Financial Mathematics Models

Since 1980s, In western countries and USA, the electric power industry has carried on a profound transformation. The content is to break the monopoly and introduce competiton, to achieve the goal of enhancing the efficiency and optimizing resources disposition, to standard electrical power system movement by replacing the administrative method with the market method. That is the electric power marketability revolution.Because the electric energy can't be effective storaged by large-scale and electric power supply and demand have real-time balanced request, it has caused the electric power price fierce undulation. This has brought the huge price risk for the market member, if the risk will not be managed effectively, it will bring the disastrous consequence. The fluctuation of the electric price in the electric power market make more and more market designers and the participants realize the importance of risk management. An important content in risk management is to develop the electric power financial market, that is to absorb market participants disperse market risk and reduce transaction cost by developing future contracts,futures. It also allow the participants to fix the electric power price so that they will have the chance to formulate the suitable short-term and middle-term plan to reduce the risk bringing by the price fluctuation.The appearance and development of electric power financial market is an inevitable request of electric power marketability. The theory and movement practice proved that the mode which unify the electric power financial market and electric power spot market is a shortcutof the safe and efficient electric power marketability.This article work is to fix the price of electric power derivation product and have a meticulous research to concrete development pattern on foreign electric power financial market. We aslo carried thorough analysis and practice elaboration on the appearance, development and concrete operation regulation of electric derivation product, the bionomial tree model of the option of electric futures, the electrical futures transaction and the futures option's price analysis based on binomial tree model on PJM market.The work primary coverage is as follows:1. First, we proposed that the binomial tree method which is widely used in financial mathematics could be used in electric option's pricing and described it's theoretical principle.2. Then we had an example analysis on the option of electric futures on PJM markrt based on binimial tree model, researched emphatically parameter match and estimate method in this model, made the contrast analysis in view of different methods. The conclusion indicated that the binomial tree method is an useful method for pricing the electric future option.3. At last, this article did a research on the appearance, development, the pattern and effect of operation of international electric financial market, had given revelations on PJM and northern Europe market of sussessful operation.