Modeling the electricity spot price with switching regime semi-nonparametric distributions

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dc.contributor.authorTrespalacios, Alfredo
dc.contributor.authorCortés, Lina M.
dc.contributor.authorPerote, Javier
dc.contributor.eafitauthoralfredotrespalacios@itm.edu.co
dc.coverage.spatialMedellín de: Lat: 06 15 00 N degrees minutes Lat: 6.2500 decimal degrees Long: 075 36 00 W degrees minutes Long: -75.6000 decimal degreeseng
dc.date.accessioned2019-11-25T15:54:50Z
dc.date.available2019-11-25T15:54:50Z
dc.date.issued2019-11-22
dc.description.abstractSpot prices of electricity in liberalized markets feature seasonality, mean reversion, random short-term jumps, skewness and highly kurtosis, as a result from the interaction between the supply and demand and the physical restrictions for transportation and storage. To account for such stylized facts, we propose a stochastic process with a component of mean reversion and switching regime to represent the dynamics of the spot price of electricity and its logarithm. The short-term movements are represented by semi-nonparametric (SNP) distributions, in contrast to previous studies that traditionally assume Gaussian processes. The application is done for the Colombian electricity market, where El Niño phenomenon represents an additional source of risk that should be considered to guarantee long-term supply, sustainability of investments and efficiency of prices. We show that the switching regime model with SNP distributions for the random components outperforms traditional models leading to accurate estimates and simulations, and thus being a useful tool for risk management and policy making.eng
dc.identifier.jelC14
dc.identifier.jelC22
dc.identifier.jelC53
dc.identifier.jelL94
dc.identifier.jelL98
dc.identifier.jelQ2
dc.identifier.urihttp://hdl.handle.net/10784/14587
dc.language.isoengeng
dc.publisherUniversidad EAFITspa
dc.publisher.departmentEscuela de Economía y Finanzasspa
dc.rights.accessrightsinfo:eu-repo/semantics/openAccesseng
dc.rights.localAcceso abiertospa
dc.subject.keywordElectricity marketsspa
dc.subject.keywordGram-Charlier seriesspa
dc.subject.keywordswitching regime modelsspa
dc.subject.keywordOrnstein–Uhlembeck processspa
dc.titleModeling the electricity spot price with switching regime semi-nonparametric distributionseng
dc.typeworkingPapereng
dc.typeinfo:eu-repo/semantics/workingPapereng
dc.type.hasVersiondrafteng
dc.type.localDocumento de trabajo de investigaciónspa

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