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Modeling electricity prices: jump diffusion and regime switching

Author

Listed:
  • Rafal Weron
  • Michael Bierbrauer
  • Stefan Trück

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

  • Rafal Weron & Michael Bierbrauer & Stefan Trück, 2003. "Modeling electricity prices: jump diffusion and regime switching," HSC Research Reports HSC/03/01, Hugo Steinhaus Center, Wroclaw University of Technology.
    • Handle: RePEc:wuu:wpaper:hsc0301
    DOI: doi:10.1016/j.physa.2004.01.008
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    File URL: http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_03_01.pdf
    File Function: Revised version, 2003
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    File URL: http://dx.doi.org/doi:10.1016/j.physa.2004.01.008
    File Function: Final printed version, 2004
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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, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Electricity price; Jump diffusion; Regime switching; Seasonality;
    All these keywords.

    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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