The stability of electricity prices: Estimation and inference of the Lyapunov exponents

Mikael Bask, Tung Liu () and Anna Widerberg

Physica A: Statistical Mechanics and its Applications, 2007, vol. 376, issue C, 565-572

Abstract: The aim of this paper is to illustrate how the stability of a stochastic dynamic system is measured using the Lyapunov exponents. Specifically, we use a feedforward neural network to estimate these exponents as well as asymptotic results for this estimator to test for unstable (chaotic) dynamics. The data set used is spot electricity prices from the Nordic power exchange market, Nord Pool, and the dynamic system that generates these prices appears to be chaotic in one case since the null hypothesis of a non-positive largest Lyapunov exponent is rejected at the 1 per cent level.

Keywords: Feedforward neural network; Lyapunov exponents; Nord pool; Spot electricity prices; Stochastic dynamic system (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The Stability of Electricity Prices: Estimation and Inference of the Lyapunov Exponent (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:376:y:2007:i:c:p:565-572

DOI: 10.1016/j.physa.2006.10.016

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