An Intraday Empirical Analysis of Electricity Price Behaviour
AbstractThis paper proposes an approach to the intraday analysis of the dynamics of electricity prices. The Growth Optimal Portfolio (GOP) is used as a reference unit in a continuous financial electricity price model. A diversified global portfolio in the form of a market capitalisation weighted index approximates the GOP. The GOP, measured in units of electricity, is normalised and then modeled as a time transformed square root process of dimension four. The dynamics of the resulting process is empirically verified. Intraday spot electricity prices from the US and Australian markets are used for this analysis. The empirical findings identify a simple but realistic model for examining the volatile behaviours of electricity prices. The proposed model reflects the historical price evolution reasonably well by using a only a few robust but readily observable parameters. The evolution of the tranformed times is modeled via a rapidly evolving market activity. A periodic, ergodic process with deterministic volatility is used to model market activity.
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Bibliographic InfoPaper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 140.
Date of creation: 01 Nov 2004
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intraday analysis; electricity price model; growth optimal portfolio; market activity;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-27 (All new papers)
- NEP-ENE-2005-02-27 (Energy Economics)
- NEP-FIN-2005-02-27 (Finance)
- NEP-RMG-2005-02-27 (Risk Management)
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