Modeling the distribution of day-ahead electricity returns: a comparison

Sandro Sapio ()

Quantitative Finance, 2012, vol. 12, issue 12, 1935-1949

Abstract: This paper contributes to the characterization of the probability density of the price returns in some European day-ahead electricity markets (NordPool, APX, Powernext) by fitting flexible and general families of distributions, such as the α-stable, Normal Inverse Gaussian (NIG), Exponential Power (EP), and Asymmetric Exponential Power (AEP) distributions, and comparing their goodness of fit. The α-stable and the NIG systematically outperform the EP and AEP models, but the tail behavior and the skewness are sensitive to the definition of the returns and to the deseasonalization methods. In particular, the logarithmic transform and volatility rescaling tend to dampen the extreme returns.

Date: 2012
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Working Paper: Modelling the distribution of day-ahead electricity returns: a comparison (2009)
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DOI: 10.1080/14697688.2010.502540

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