Research Article Forecasting Energy Market Contracts by Ambit Processes: Empirical Study and Numerical Results Luca Di Persio and Michele Marchesan Department of Computer Science, University of Verona, Strada le Grazie 15, 37134 Verona, Italy Correspondence should be addressed to Luca Di Persio; dipersioluca@gmail.com Received 10 June 2014; Revised 15 July 2014; Accepted 18 July 2014; Published 29 October 2014 Academic Editor: Ismat Beg Copyright © 2014 L. Di Persio and M. Marchesan. Tis is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. In the present paper we exploit the theory of ambit processes to develop a model which is able to efectively forecast prices of forward contracts written on the Italian energy market. Both short-term and medium-term scenarios are considered and proper calibration procedures as well as related numerical results are provided showing a high grade of accuracy in the obtained approximations when compared with empirical time series of interest. 1. Introduction In recent years the economy of energy markets has been interested by deep transformations due to political as well as technological changes all over the world. Such innovations have been ofen characterized by procedures of liberalisation which have ofen led to the creation of completely new markets as in the case of, for example, the Nordic Nord Pool market, the German EEX market, the Italian GME, and so forth, most of which are animated by a plethora of diferent fnancial products such as spot or forward/futures contracts, European options, and exotic options. Although energy markets seem similar to classical fnan- cial ones, there are many diferences between them. Te elec- tricity spot cannot be stored directly, or, at least, only a small quantity can be kept using reservoirs for hydrogenerated power or exploiting large and expensive batteries. Tis makes the supply of power very inelastic as it is infuenced by sea- sonal, weekly, and intradaily pattern, resulting in a very illiquid framework. Latter characteristics give rise to incompleteness of the energy markets; hence classical mathematical approaches, such as those which are based on the Brownian setting, for example, the Black and Scholes model (see [1]) are not satis- factory; see, for example, [2, 3] and references therein. To overcome (at least some of) such drawbacks, the theory of ambit processes has been proposed by Barndorf- Nielsen and Schmiegel; see [4], where the authors studied some type of turbulence’s problems which was later applied to analyse energy markets and then improved to take into account related fnancial products; see, for example, [5–7]. Let us underline the fact that ambit processes provide a fexible class of random feld models where we can easily incorporate leptokurtic behaviors in returns, stochastic volatility, seasonal pattern, and the observed Samuelson efect; see, for example, [8] and references therein, for a treatment of such an economical efect. Ambit processes (see Section 2 and references therein for details) are characterized by a L´ evy basis and a deterministic function, integrated on an interval called ambit set. Tey allow specifying directly the model based on a probabilistic understanding of the phenomena; moreover they are well defned under weak integrability conditions. We would also like to underline the fact that the theory of stochastic diferen- tial equations driven by L´ evy processes has been widely used in fnance providing an efective set of techniques used to model a huge quantity of diferent fnancial scenarios; see, for example, [9–12] and references therein. In this work we briefy present the theory of ambit processes emphasizing how they can be applied to the study of Hindawi Publishing Corporation International Scholarly Research Notices Volume 2014, Article ID 879892, 10 pages http://dx.doi.org/10.1155/2014/879892