A two-factor model for electricity prices with dynamic volatility

Stephan Schlüter

The wavelet transform is used to identify a biannual and an annual seasonality in the Phelix Day Peak and to separate the long-term trend from its short-term motion. The short-term/long-term model for commodity prices of Schwartz & Smith (2000) is applied but generalised to account for weekly periodicities and time-varying volatility. Eventually we find a bivariate SARMA-CCC-GARCH model to fit best. Moreover it surpasses the goodness of fit of an univariate GARCH model, which shows that the additional effort of dealing with a two-factor model is worthwile. -- Wavelets ; Seasonal Filter ; Relative Wavelet Energy ; Multivariate GARCH ; Energy Price Modelling

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Year of publication:	2009
Authors:	Schlüter, Stephan
Publisher:	Erlangen : Univ., Inst. für Wirtschaftspolitik und Quantitative Wirtschaftsforschung
Subject:	Strompreis \| Electricity price \| Volatilität \| Volatility \| Zustandsraummodell \| State space model \| Zeitreihenanalyse \| Time series analysis \| ARCH-Modell \| ARCH model \| Multivariate Analyse \| Multivariate analysis \| Theorie \| Theory