Electricity Price Modelling with a Regime Switching Volatility
AbstractWe present a methodology to model electricity price dynamics by applying the interest rate theory toolkit. We construct the electricity market following  and applying the Heath, Jarrow and Morton () model. The electricity returns forward curve evolution using the Regime Switching Volatility is the instrument chosen to reflect into a simulating model the natural seasonality of electricity prices. The model calibration and the volatility parameters estimation allow to simulate in a realistic way the future electricity prices.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia in its series Quaderni DSEMS with number 06-2010.
Date of creation: Jun 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-06 (All new papers)
- NEP-ENE-2010-11-06 (Energy Economics)
- NEP-IND-2010-11-06 (Industrial Organization)
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