This paper presents a novel methodology to simulate the economic performance of hydro storage systems in the day-ahead (DA) and real-time (RT) markets. A detailed hydro storage system model is proposed to capture the unique characteristics of hydro storage units. A unique RT market bidding method named Tiered Bidding is proposed to represent the RT market offers of hydro storage units. In order to accurately represent the way hydro storage systems participate in the RT market, four hydro system RT bidding strategies are proposed and evaluated. The proposed methodology is applied to the Eastern Interconnection system to evaluate the economic benefits of Manitoba Hydro's market participation in MISO's RT energy and ancillary services market.