Price formation and optimal trading in intraday electricity markets
We study price formation in intraday electricity markets in the presence of intermittent renewable generation. We use stochastic control theory to identify optimal strategies of agents with market impact and exhibit the Nash equilibrium in closed form for a finite number of agents as well as in the asymptotic framework of Mean field games, both in the setting of homogeneous agents and in the presence of a major producer acting strategically. We show that our model is able to reproduce the empirical facts observed in the market, such as price impact and price volatility. Joint work with Olivier Feron and Laura Tinsi.