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Factor models in the German electricity market: Stylized facts, seasonality, and calibration

W.J. Hinderks and A. Wagner

Energy Economics, 2020, vol. 85, issue C

Abstract: The class of arithmetic factor models is flexible enough to model all stylized facts occurring in electricity markets, including negative prices, while still yielding tractable derivative prices. In this paper we conduct a thorough review of the requirements and possibilities of factor models. We compare different seasonality functions and study their power to deseasonalise day-ahead spot prices from the EPEX Germany/Austria market. Furthermore, we introduce an alternative method to estimate mean reversion speed based on ARMA time series and a method to evaluate the distributional fit of the model to realised market prices, which we apply to two non-Gaussian estimated models.

Keywords: Electricity price model; Calibration; Arithmetic factor models; Seasonality functions (search for similar items in EconPapers)
JEL-codes: C10 C13 C32 C51 Q40 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:85:y:2020:i:c:s0140988319301033

DOI: 10.1016/j.eneco.2019.03.024

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