Regime-switching characterization of electricity prices dynamics

Carlo Mari

Physica A: Statistical Mechanics and its Applications, 2006, vol. 371, issue 2, 552-564

Abstract: Stochastic models of electricity prices have been used extensively during the last few years to describe prices fluctuations in deregulated power markets. Regime-switching models seem good candidates to capture the main features of electricity prices dynamics as the mean-reversion property as well the presence of jumps and spikes. Since they offer the possibility to introduce various mean-reversion rates, volatility and jumps, depending on the state of the system, such models allow to describe the properties of the stable motion and of the spike dynamics in a very flexible way. In this paper, two-regime and three-regime models are discussed, and a comparison performed on market data, is proposed.

Keywords: Electricity prices; Jump-diffusions; Regime-switches; Spikes (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:371:y:2006:i:2:p:552-564

DOI: 10.1016/j.physa.2006.03.040

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