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A Stochastic Calculus Model for the Spot Price of Computing Power

Fernando Martinez Ortuno, Uli Harder

National Workshop Paper
UKPEW 2010
July, 2010

In this paper we study the evolution of the spot price of computing power in a possible future world market for computing power. This global market is implemented as a peer-to-peer computer network and has been modelled via simulations previously. We find that the log-returns of the spot price of computing power follow a similar distribution to the ones of electricity prices or the DAX index. We then develop a stochastic calculus model that captures the essence of the evolution of the spot price of computing power using a Markov regime-switching mechanism between three states. We estimate the values of the parameters of the model via maximum likelihood and we finally do an exact numerical stochastic simulation of the three-regime model and compare it with the original market behaviour.

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