The purpose of this paper is to show that using the toolkit of interest rate theory, already well known in financial engineering as the HJM model [D. Heath, R. Jarrow, A. Morton, {ITALIC Econometrica} 60, 77 (1992)], it is possible to derive explicite option pricing formula and calibrate the theoretical model to the empirical electricity market. The analysis is illustrated by numerical cases from the European Energy Exchange (EEX) in Leipzig. The multi-factor {ITALIC versus} one-factor HJM models are compared.

PACS numbers: 05.40.--a, 02.50.Ey, 05.45.--a