Volatility of power markets

Ingve Simonsen

Physica A: Statistical Mechanics and its Applications, 2005, vol. 355, issue 1, 10-20

Abstract: Volatility features of the Nordic day ahead power spot market for a 12-year period up till May 2004 are studied. The daily logarithmic volatility was measured for this period to be about 16%. This level is well above what is observed for most other well-studied financial markets. Volatility clustering, log-normal distribution, and long-range correlations are found to be striking features of the volatility of power markets. In addition, a cyclic behavior of the time-dependent volatility can be observed for the Nordic power market. Furthermore, the volatility shows a dependence on the price level, and this is pronounced mostly when the spot price is low. The correlation in volatility is consistent with an inverse power-law decay, τ-ν, superposed on an oscillating term. The numerical value of the exponent ν is similar to what has been reported previously for stock markets.

Keywords: Volatility; Electricity markets; Deregulation; Econophysics; Interdisciplinary physics (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:355:y:2005:i:1:p:10-20

DOI: 10.1016/j.physa.2005.02.062

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