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Volatility of power markets

  • Simonsen, Ingve
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    Volatility features of the Nordic day ahead power spot market for a 12-year period up till May 2004 are studied. The daily logarithmic volatility was measured for this period to be about 16%. This level is well above what is observed for most other well-studied financial markets. Volatility clustering, log-normal distribution, and long-range correlations are found to be striking features of the volatility of power markets. In addition, a cyclic behavior of the time-dependent volatility can be observed for the Nordic power market. Furthermore, the volatility shows a dependence on the price level, and this is pronounced mostly when the spot price is low. The correlation in volatility is consistent with an inverse power-law decay, τ-ν, superposed on an oscillating term. The numerical value of the exponent ν is similar to what has been reported previously for stock markets.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378437105002712
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    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 355 (2005)
    Issue (Month): 1 ()
    Pages: 10-20

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    Handle: RePEc:eee:phsmap:v:355:y:2005:i:1:p:10-20
    Contact details of provider: Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

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    1. Rafal Weron & Ingve Simonsen & Piotr Wilman, 2003. "Modeling highly volatile and seasonal markets: evidence from the Nord Pool electricity market," Econometrics 0303007, EconWPA.
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