Regime-switching models for electricity spot prices: Introducing heteroskedastic base regime dynamics and shifted spike distributions
We calibrate Markov regime-switching (MRS) models to mean daily spot prices from the EEX market. Our empirical study shows that (i) models with shifted spike regime distributions lead to more realistic models of electricity spot prices and that (ii) introducing heteroskedasticity in the base regime leads to better spike identification and goodness-of-fit than in MRS models with the standard mean-reverting, constant volatility dynamics.
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- Rafał Weron, 2009.
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Mathematical Methods of Operations Research,
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