Modelling spikes in electricity markets using excitable dynamics

Angela De Sanctis and Carlo Mari

Physica A: Statistical Mechanics and its Applications, 2007, vol. 384, issue 2, 457-467

Abstract: We present a general methodology to model spikes in deregulated electricity markets using excitable dynamics in a multi-regime switching approach. In particular, we propose a two-regime switching model and a three-regime switching model in which the spikes phenomenon is described by a FitzHugh–Nagumo excitable dynamics. Both models seems to be interesting candidates for describing the main characteristics of electricity price dynamics as the occurrence of stable periods in which prices fluctuate around some long-run mean, and turbulent periods in which prices experience jumps and spikes of very large magnitude. In agreement with market data, both models can produce probability distributions of price returns with positive skewness and very high values of kurtosis.

Keywords: Excitable dynamics; Electricity prices; Regime-switches; Spikes (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:384:y:2007:i:2:p:457-467

DOI: 10.1016/j.physa.2007.05.015

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