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Electricity spot price modelling with a view towards extreme spike risk

Author

Listed:
  • Claudia Kluppelberg
  • Thilo Meyer-Brandis
  • Andrea Schmidt

Abstract

Sums of Levy-driven Ornstein-Uhlenbeck processes are appropriate for modelling electricity spot price data. In this paper we present a new estimation method with particular emphasis on capturing the high peaks, which is one of the stylized features of such data. After introducing our method we show it at work for the EEX Phelix Base electricity price index. We also present a small simulation study to demonstrate the performance of our estimation procedure.

Suggested Citation

  • Claudia Kluppelberg & Thilo Meyer-Brandis & Andrea Schmidt, 2010. "Electricity spot price modelling with a view towards extreme spike risk," Quantitative Finance, Taylor & Francis Journals, vol. 10(9), pages 963-974.
  • Handle: RePEc:taf:quantf:v:10:y:2010:i:9:p:963-974
    DOI: 10.1080/14697680903150496
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    References listed on IDEAS

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    1. Helyette Geman & A. Roncoroni, 2006. "Understanding the Fine Structure of Electricity Prices," Post-Print halshs-00144198, HAL.
    2. repec:dau:papers:123456789/1433 is not listed on IDEAS
    3. Ole E. Barndorff‐Nielsen & Neil Shephard, 2001. "Non‐Gaussian Ornstein–Uhlenbeck‐based models and some of their uses in financial economics," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241.
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    Citations

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    Cited by:

    1. repec:eee:spapps:v:129:y:2019:i:2:p:419-451 is not listed on IDEAS
    2. Herrera, Rodrigo & González, Nicolás, 2014. "The modeling and forecasting of extreme events in electricity spot markets," International Journal of Forecasting, Elsevier, vol. 30(3), pages 477-490.
    3. Olga Y. Uritskaya & Vadim M. Uritsky, 2015. "Predictability of price movements in deregulated electricity markets," Papers 1505.08117, arXiv.org.
    4. D. Baños & T. Meyer-Brandis & F. Proske & S. Duedahl, 2017. "Computing deltas without derivatives," Finance and Stochastics, Springer, vol. 21(2), pages 509-549, April.
    5. repec:eee:eneeco:v:63:y:2017:i:c:p:51-65 is not listed on IDEAS
    6. Fred Espen Benth & Claudia Kluppelberg & Gernot Muller & Linda Vos, 2012. "Futures pricing in electricity markets based on stable CARMA spot models," Papers 1201.1151, arXiv.org.
    7. Fanone, Enzo & Gamba, Andrea & Prokopczuk, Marcel, 2013. "The case of negative day-ahead electricity prices," Energy Economics, Elsevier, vol. 35(C), pages 22-34.
    8. repec:eee:eneeco:v:67:y:2017:i:c:p:496-507 is not listed on IDEAS
    9. Uritskaya, Olga Y. & Uritsky, Vadim M., 2015. "Predictability of price movements in deregulated electricity markets," Energy Economics, Elsevier, vol. 49(C), pages 72-81.
    10. Ole E. Barndorff-Nielsen & Fred Espen Benth & Almut E. D. Veraart, 2013. "Modelling energy spot prices by volatility modulated L\'{e}vy-driven Volterra processes," Papers 1307.6332, arXiv.org.
    11. Schnurr Alexander & Woerner Jeannette H. C., 2011. "Well-balanced Lévy driven Ornstein–Uhlenbeck processes," Statistics & Risk Modeling, De Gruyter, vol. 28(4), pages 343-357, December.
    12. Ulrich Hounyo & Rasmus T. Varneskov, 2018. "Inference for Local Distributions at High Sampling Frequencies: A Bootstrap Approach," CREATES Research Papers 2018-16, Department of Economics and Business Economics, Aarhus University.
    13. Stephen Chan & Saralees Nadarajah, 2015. "Extreme value analysis of electricity demand in the UK," Applied Economics Letters, Taylor & Francis Journals, vol. 22(15), pages 1246-1251, October.
    14. Benth, Fred Espen & Klüppelberg, Claudia & Müller, Gernot & Vos, Linda, 2014. "Futures pricing in electricity markets based on stable CARMA spot models," Energy Economics, Elsevier, vol. 44(C), pages 392-406.

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