Modeling extreme dependence between European electricity markets

Erik Lindström and Fredrik Regland

Energy Economics, 2012, vol. 34, issue 4, 899-904

Abstract: Electricity spot prices are characterized by sudden large movements, followed a few days later by an equally large movement in the opposite direction. These phenomena are called spikes (upward movements) and drops (downward movements). Recent research has suggested that the dynamics of the electricity spot prices can be accurately described by hidden Markov Regime Switching (MRS) models. Regime switch models separate the ordinary dependence and the extreme (spike or drop) dependence. This is a crucial point since it is the extreme dependence that is of interest when computing risks.

Keywords: Hidden Markov Regime Switching models; Electricity spot price; Independent Spike models; Market integration (search for similar items in EconPapers)
JEL-codes: C1 C5 G1 Q4 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988312000837
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:4:p:899-904

DOI: 10.1016/j.eneco.2012.04.006

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().