2009/21 | LEM Working Paper Series | |
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Modelling the distribution of day-ahead electricity returns: a comparison |
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Sandro Sapio |
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Keywords | ||
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Electricity prices, alpha-stable, Normal Inverse Gaussian, Exponential Power,Asymmetric Exponential Power, goodness-of-fit
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JEL Classifications | ||
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C16, L94
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Abstract | ||
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This paper contributes to characterizing the probability density of the price returns
in some European day-ahead electricity markets (NordPool, APX, Powernext) by fitting
some flexible and general families of distributions, such as the alpha-stable, Normal Inverse
Gaussian (NIG), Exponential Power (EP), and Asymmetric Exponential Power (AEP),
and comparing their goodness of fit. The alpha-stable and the NIG systematically outperform
the EP and AEP models, but the tail behaviours and the skewness are sensitive to the
definition of returns and to the deseasonalization methods. In particular, the logarithmic
transform and volatility rescaling tend to dampen the extreme returns.
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Downloads | ||
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