Joint extreme risk of energy prices-evidence from European energy markets

Yiqun Sun, Hao Ji, Xiurong Cai and Jiangchen Li

Finance Research Letters, 2023, vol. 56, issue C

Abstract: We investigate joint tail events behavior of prices risk in European energy markets and to explore its interlinkages with supply and demand, financial market panics, policy uncertainty, and environmental regulation. Results reveal that extreme occurrences have a short-term memory, and the occurrence of extreme high prices lowers the likelihood of extreme high prices the following year, in contrast to extreme low prices, indicating a negative seasonal impact. The influence of same extraordinary events on extreme highs and extreme lows is asymmetric. Additionally, different exogenous shocks have varying effects on extreme pricing, as shown through intervention analysis under several shock scenarios.

Keywords: Joint extreme events; Integer GARCH; Negative binomial distribution; Interventional analysis (search for similar items in EconPapers)
JEL-codes: E31 G01 Q43 Q47 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004087

DOI: 10.1016/j.frl.2023.104036

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