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A conditionally heteroskedastic model with time-varying coefficients for daily gas spot prices

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  • Regnard, Nazim
  • Zakoian, Jean-Michel

Abstract

A novel GARCH(1,1) model, with coefficients function of the realizations of an exogenous process, is considered for the volatility of daily gas prices. A distinctive feature of the model is that it produces non-stationary solutions. The probability properties, and the convergence and asymptotic normality of the Quasi-Maximum Likelihood Estimator (QMLE) have been derived by Regnard and Zakoian (2009). The prediction properties of the model are considered. We derive a strongly consistent estimator of the asymptotic variance of the QMLE. An application to daily gas spot prices from the Zeebruge market is presented. Apart from conditional heteroskedasticity, an empirical finding is the existence of distinct volatility regimes depending on the temperature level.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22642.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:22642

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Keywords: GARCH; Gas prices; Nonstationary models; Periodic models; Quasi-maximum likelihood estimation; Time-varying coefficients;

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