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Modeling extreme dependence between European electricity markets

  • Lindström, Erik
  • Regland, Fredrik
Registered author(s):

    Electricity spot prices are characterized by sudden large movements, followed a few days later by an equally large movement in the opposite direction. These phenomena are called spikes (upward movements) and drops (downward movements). Recent research has suggested that the dynamics of the electricity spot prices can be accurately described by hidden Markov Regime Switching (MRS) models. Regime switch models separate the ordinary dependence and the extreme (spike or drop) dependence. This is a crucial point since it is the extreme dependence that is of interest when computing risks.

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    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 34 (2012)
    Issue (Month): 4 ()
    Pages: 899-904

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    Handle: RePEc:eee:eneeco:v:34:y:2012:i:4:p:899-904
    Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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