Decomposing electricity prices with jumps
We propose a model that decomposes electricity prices into two independent stochastic processes: one that represents the “normal” pattern of electricity prices and another that captures temporary shocks or “jumps”, with non-lasting effects in the market. Each contains specific mean reverting paramet...
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| Tipo de recurso: | artículo |
| Estado: | Versión publicada |
| Fecha de publicación: | 2005 |
| País: | México |
| Institución: | EL COLEGIO DE MÉXICO |
| Repositorio: | Estudios Económicos de El Colegio de México |
| Idioma: | inglés |
| OAI Identifier: | oai:oai.estudioseconomicos.colmex.mx:article/169 |
| Acceso en línea: | https://estudioseconomicos.colmex.mx/index.php/economicos/article/view/169 |
| Access Level: | acceso abierto |
| Palabra clave: | electricity prices mean-reversion jump modelling markov switching models state-space representation energy finance C51 C52 C53 Q41 precios de electricidad finanzas de energía representación estado-espacio |
| Sumario: | We propose a model that decomposes electricity prices into two independent stochastic processes: one that represents the “normal” pattern of electricity prices and another that captures temporary shocks or “jumps”, with non-lasting effects in the market. Each contains specific mean reverting parameters to estimate. In order to identify such components we specify a state-space model with regime switching and apply the Kim’s (1994) filtering algorithm to estimate the model for the mean adjusted series of New South Wales’ electricity prices. Finally, bootstrap simulations were performed to estimate the expected contribution of each of the components in the overall electricity prices. |
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