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Forecasting Time-Varying Covariance Matrices In Intradaily Electricity Spot Prices

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Author Info

  • Ángel León

    ()
    (Universidad de Alicante)

  • Antonio Rubia

    (Universidad de Alicante)

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    Abstract

    This paper deals with analysing and forecasting intradaily volatility in electricity spot prices. We analyse the hourly spot prices from the Argentine Electricity Market by grouping prices in three daily series (block bids). We estimate the VAR model for the conditional mean structure and several multivariate analysis based on the multivariate GARCH models, specifically the orthogonal GARCH by Alexander (2000) and the constrained multivariate GARCH by Engle and Mezrich (1996). We also measure the forecasting performance of the daily block bid volatilities and covariances under both approaches obtaining similar results. This methodology could be used for managing risk of block bid portfolios and also for the valuation of derivatives on intradaily time-blocks of electricity spot prices.

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2002-10.pdf
    File Function: Fisrt version / Primera version, 2002
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    Bibliographic Info

    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2002-10.

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    Length: 28 pages
    Date of creation: Jul 2002
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasad:2002-10

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    Related research

    Keywords: Electricity Industry; Intradaily Volatility; Value-at-Risk Models;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Ángel León & Antonio Rubia, 2001. "Comportamiento Del Precio Y Volatilidad En El Pool Eléctrico Español," Working Papers. Serie EC 2001-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Hyllerberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988. "Seasonal Integration And Cointegration," Papers 0-88-2, Pennsylvania State - Department of Economics.
    3. repec:cup:etheor:v:11:y:1995:i:1:p:122-50 is not listed on IDEAS
    4. Antonio Rubia, 2001. "Testing For Weekly Seasonal Unit Roots In Daily Electricity Demand: Evidence From Deregulated Markets," Working Papers. Serie EC 2001-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
    6. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    7. H. N. E. BystrOm, 2003. "The hedging performance of electricity futures on the Nordic power exchange," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 1-11.
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