Modeling extreme dependence between European electricity markets
AbstractElectricity spot prices are characterized by sudden large movements, followed a few days later by an equally large movement in the opposite direction. These phenomena are called spikes (upward movements) and drops (downward movements). Recent research has suggested that the dynamics of the electricity spot prices can be accurately described by hidden Markov Regime Switching (MRS) models. Regime switch models separate the ordinary dependence and the extreme (spike or drop) dependence. This is a crucial point since it is the extreme dependence that is of interest when computing risks.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 34 (2012)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/eneco
Hidden Markov Regime Switching models; Electricity spot price; Independent Spike models; Market integration;
Find related papers by JEL classification:
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- G1 - Financial Economics - - General Financial Markets
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
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- Eichler Michael & Tuerk Dennis, 2012. "Fitting semiparametric Markov regime-switching models to electricity spot prices," Research Memoranda 036, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
- Ciarreta Antuñano, Aitor & Zárraga Alonso, Ainhoa, 2012. "Analysis of volatility transmissions in integrated and interconnected markets: The case of the Iberian and French markets," BILTOKI Biltoki;2012-04, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
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