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Modeling electricity prices: jump diffusion and regime switching

Author

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  • Weron, R
  • Bierbrauer, M
  • Trück, S

Abstract

In this paper we address the issue of modeling spot electricity prices. After summarizing the stylized facts about spot electricity prices, we review a number of models proposed in the literature. Afterwards we fit a jump diffusion and a regime switching model to spot prices from the Nordic power exchange and discuss the pros and cons of each one.

Suggested Citation

  • Weron, R & Bierbrauer, M & Trück, S, 2004. "Modeling electricity prices: jump diffusion and regime switching," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(1), pages 39-48.
  • Handle: RePEc:eee:phsmap:v:336:y:2004:i:1:p:39-48
    DOI: 10.1016/j.physa.2004.01.008
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    References listed on IDEAS

    as
    1. Härdle, Wolfgang Karl & Burnecki, Krzysztof & Weron, Rafał, 2004. "Simulation of risk processes," Papers 2004,01, Humboldt University of Berlin, Center for Applied Statistics and Economics (CASE).
    2. Rafal Weron & Ingve Simonsen & Piotr Wilman, 2003. "Modeling highly volatile and seasonal markets: evidence from the Nord Pool electricity market," Econometrics 0303007, EconWPA.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Electricity price; Jump diffusion; Regime switching; Seasonality;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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