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Joint extreme risk of energy prices-evidence from European energy markets

Author

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  • Sun, Yiqun
  • Ji, Hao
  • Cai, Xiurong
  • Li, Jiangchen

Abstract

We investigate joint tail events behavior of prices risk in European energy markets and to explore its interlinkages with supply and demand, financial market panics, policy uncertainty, and environmental regulation. Results reveal that extreme occurrences have a short-term memory, and the occurrence of extreme high prices lowers the likelihood of extreme high prices the following year, in contrast to extreme low prices, indicating a negative seasonal impact. The influence of same extraordinary events on extreme highs and extreme lows is asymmetric. Additionally, different exogenous shocks have varying effects on extreme pricing, as shown through intervention analysis under several shock scenarios.

Suggested Citation

  • Sun, Yiqun & Ji, Hao & Cai, Xiurong & Li, Jiangchen, 2023. "Joint extreme risk of energy prices-evidence from European energy markets," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004087
    DOI: 10.1016/j.frl.2023.104036
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    More about this item

    Keywords

    Joint extreme events; Integer GARCH; Negative binomial distribution; Interventional analysis;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G01 - Financial Economics - - General - - - Financial Crises
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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