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The goodness-of-fit of the fuel-switching price using the mean-reverting Lévy jump process

Author

Listed:
  • Julien Chevallier
  • Stéphane Goutte

Abstract

This article analyzes the interactions between the electricity and CO2 (carbon) markets. In particular, we describe the dynamics of the fuel-switching price (from coal to gas) when taking into account carbon costs. Several stochastic processes are con

Suggested Citation

  • Julien Chevallier & Stéphane Goutte, 2014. "The goodness-of-fit of the fuel-switching price using the mean-reverting Lévy jump process," Working Papers 2014-285, Department of Research, Ipag Business School.
  • Handle: RePEc:ipg:wpaper:2014-285
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    References listed on IDEAS

    as
    1. Alberola, Emilie & Chevallier, Julien & Chèze, Benoît, 2009. "Emissions Compliances and Carbon Prices under the EU ETS: A Country Specific Analysis of Industrial Sectors," Journal of Policy Modeling, Elsevier, vol. 31(3), pages 446-462, May.
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    More about this item

    Keywords

    CO2; Fuel-Switching; Lévy Jump process; Mean-reversion; Normal Inverse Gaussian; Variance Gamma; Model fit; Heavy tails; Goodness-of-fit testing.;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • 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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