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Stochastic multifactor modeling of spot electricity prices
Date
2014-03-15
Author
Hayfavi, Azize
Metadata
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In this paper, a stochastic multifactor model is proposed for modeling of the daily spot market electricity prices. Stochastic part of the model is composed of three jump processes and a Brownian motion where two of the jump processes are assumed to be mean reverting with different mean reversion rates. The multistep algorithm proposed for model estimation utilizes an iterative threshold function (constructed on GARCH(1,1) volatility estimates) in separation of the jumps. The factor model is applied to Turkish day ahead electricity market. In order to evaluate the performance of the proposed multifactor model, estimation results are also compared to the results acquired by application of mean reverting jump diffusion model of Cartea and Figueroa (2005) and Markov regime switching model of Janczura and Weron (2010) to the same data set.
Subject Keywords
GARCH(1.1)
,
Threshold
,
Jump process
,
Stochastic multifactor model
,
Electricity spot price
URI
https://hdl.handle.net/11511/30880
Journal
JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS
DOI
https://doi.org/10.1016/j.cam.2013.10.008
Collections
Graduate School of Applied Mathematics, Article
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A. Hayfavi, “Stochastic multifactor modeling of spot electricity prices,”
JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS
, pp. 434–442, 2014, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/30880.