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Modeling and Estimating Volatility of Day-Ahead Electricity Prices

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  • Sherzod N. Tashpulatov

    (Department of Economics, Management and Humanities, Faculty of Electrical Engineering, Czech Technical University in Prague, Technická 2, 166 27 Prague 6, Czech Republic
    School of Business, University of New York in Prague, Londýnská 41, 120 00 Prague 2, Czech Republic)

Abstract

We model day-ahead electricity prices of the UK power market using skew generalized error distribution. This distribution allows us to take into account the features of asymmetry, heavy tails, and a peak higher than in normal or Student’s t distributions. The adequacy of the estimated volatility model is verified using various tests and criteria. A correctly specified volatility model can be used for analyzing the impact of reforms or other events. We find that, after the start of the COVID-19 pandemic, price level and volatility increased.

Suggested Citation

  • Sherzod N. Tashpulatov, 2021. "Modeling and Estimating Volatility of Day-Ahead Electricity Prices," Mathematics, MDPI, vol. 9(7), pages 1-11, March.
    • Handle: RePEc:gam:jmathe:v:9:y:2021:i:7:p:750-:d:527492
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    References listed on IDEAS

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