Modeling Dependence of Price Spikes in Australian Electricity Markets PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Modeling Dependence of Price Spikes in Australian Electricity Markets PDF full book. Access full book title Modeling Dependence of Price Spikes in Australian Electricity Markets by Adebayo A. Aderounmu. Download full books in PDF and EPUB format.
Author: Adebayo A. Aderounmu
Publisher:
ISBN:
Category :
Languages : en
Pages : 10
Get Book Here
Book Description
Price spikes are of particular importance due to their severe impacts on consumers, businesses and industry. They constitute a major source of price risk to market participants, e.g., electricity retailers with commitments to meet customers' daily electricity demands. To those trading in several electricity markets simultaneously, the probability of simultaneous price spikes termed as tail dependence is of great importance when computing risks. For this purpose, the problem of modeling joint price spikes in the Australian electricity market is considered. A common measure of tail dependence measure is the so-called tail dependence coefficient (TDC). We present a nonparametric estimator of the tail dependence and further, the point estimation is complemented with an hypotheses test. We find significant tail dependence in electricity prices that cannot be ignored. Accurate characterization of this tail dependence is important for a variety of risk management purposes. These include hedging activities of market participants.
Author: Adebayo A. Aderounmu
Publisher:
ISBN:
Category :
Languages : en
Pages : 10
Get Book Here
Book Description
Price spikes are of particular importance due to their severe impacts on consumers, businesses and industry. They constitute a major source of price risk to market participants, e.g., electricity retailers with commitments to meet customers' daily electricity demands. To those trading in several electricity markets simultaneously, the probability of simultaneous price spikes termed as tail dependence is of great importance when computing risks. For this purpose, the problem of modeling joint price spikes in the Australian electricity market is considered. A common measure of tail dependence measure is the so-called tail dependence coefficient (TDC). We present a nonparametric estimator of the tail dependence and further, the point estimation is complemented with an hypotheses test. We find significant tail dependence in electricity prices that cannot be ignored. Accurate characterization of this tail dependence is important for a variety of risk management purposes. These include hedging activities of market participants.
Author: Adebayo A. Aderounmu
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Spot electricity prices are very volatile, particularly due to the fact that electricity cannot be economically stored and requires immediate delivery. However, the inability to store electricity means that fluctuations in demand and supply are often transmitted directly into spot prices of electricity, which leads to occasional extreme price observations, so called price spikes. These price spikes constitute a major source of price risk to market participants. More importantly, for those operating in several regional markets simultaneously, the probability of simultaneous extreme price observations, usually called tail dependence, is of great importance in implementing adequate hedging strategies. For this purpose, the problem of modelling the joint occurrence of extreme price observations in the Australian Electricity Market is considered. We suggest a new method to capture the dependence of extreme price observations across several regional markets. It uses the concept of tail copulas as models for different scenarios of joint extreme outcome. For risk management purposes, our findings point out the substantial implications which the joint extreme price observations may have for hedging decisions of market participants, and therefore, also for the pricing of electricity derivatives like futures and option contracts.
Author: Katja Ignatieva
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
Get Book Here
Book Description
We examine the dependence structure of electricity spot prices across regional markets in Australia. One of the major objectives in establishing a national electricity market was to provide a nationally integrated and efficient electricity market, limiting market power of generators in the separate regional markets. Our analysis is based on a GARCH approach to model the marginal price series in the considered regions in combination with copulae to capture the dependence structure between the marginals. We apply different copula models including Archimedean, elliptical and copula mixture models. We find a positive dependence structure between the prices for all considered markets, while the strongest dependence is exhibited between markets that are connected via interconnector transmission lines. Regarding the nature of dependence, the Student-t copula provides a good fit to the data, while the overall best results are obtained using copula mixture models due to their ability to also capture asymmetric dependence in the tails of the distribution. Interestingly, our results also suggest that for the four major markets, NSW, QLD, SA and VIC, the degree of dependence has decreased starting from the year 2008 towards the end of the sample period in 2010. Examining the Value-at-Risk of stylized portfolios constructed from electricity spot contracts in different markets, we find that the Student-t and mixture copula models outperform the Gaussian copula in a backtesting study. Our results are important for risk management and hedging decisions of market participants, in particular for those operating in several regional markets simultaneously.
Author: Michael S. Smith
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
Get Book Here
Book Description
Wholesale electricity markets are increasingly integrated via high voltage interconnectors, and inter-regional trade in electricity is growing. To model this, we consider a spatial equilibrium model of price formation, where constraints on inter-regional flows result in three distinct equilibria in prices. We use this to motivate an econometric model for the distribution of observed electricity spot prices that captures many of their unique empirical characteristics. The econometric model features supply and inter-regional trade cost functions, which are estimated using Bayesian monotonic regression smoothing methodology. A copula multivariate time series model is employed to capture additional dependence -- both cross-sectional and serial -- in regional prices. The marginal distributions are nonparametric, with means given by the regression means. The model has the advantage of preserving the heavy right-hand tail in the predictive densities of price. We fit the model to half-hourly spot price data in the five interconnected regions of the Australian national electricity market. The fitted model is then used to measure how both supply and price shocks in one region are transmitted to the distribution of prices in all regions in subsequent periods. Finally, to validate our econometric model, we show that prices forecast using the proposed model compare favorably with those from some benchmark alternatives.
Author: Harry Joe
Publisher: World Scientific
ISBN: 981429988X
Category : Business & Economics
Languages : en
Pages : 370
Get Book Here
Book Description
1. Introduction : Dependence modeling / D. Kurowicka -- 2. Multivariate copulae / M. Fischer -- 3. Vines arise / R.M. Cooke, H. Joe and K. Aas -- 4. Sampling count variables with specified Pearson correlation : A comparison between a naive and a C-vine sampling approach / V. Erhardt and C. Czado -- 5. Micro correlations and tail dependence / R.M. Cooke, C. Kousky and H. Joe -- 6. The Copula information criterion and Its implications for the maximum pseudo-likelihood estimator / S. Gronneberg -- 7. Dependence comparisons of vine copulae with four or more variables / H. Joe -- 8. Tail dependence in vine copulae / H. Joe -- 9. Counting vines / O. Morales-Napoles -- 10. Regular vines : Generation algorithm and number of equivalence classes / H. Joe, R.M. Cooke and D. Kurowicka -- 11. Optimal truncation of vines / D. Kurowicka -- 12. Bayesian inference for D-vines : Estimation and model selection / C. Czado and A. Min -- 13. Analysis of Australian electricity loads using joint Bayesian inference of D-vines with autoregressive margins / C. Czado, F. Gartner and A. Min -- 14. Non-parametric Bayesian belief nets versus vines / A. Hanea -- 15. Modeling dependence between financial returns using pair-copula constructions / K. Aas and D. Berg -- 16. Dynamic D-vine model / A. Heinen and A. Valdesogo -- 17. Summary and future directions / D. Kurowicka
Author: Adebayo A. Aderounmu
Publisher:
ISBN:
Category :
Languages : en
Pages : 19
Get Book Here
Book Description
Tail dependence characterizes cross market linkages during periods of extreme price behavior. Analyzing tail dependence can richly inform market participants, in particular those operating across several markets how to understand price risk. A copula approach is therefore employed to assess the tail dependence across regional electricity markets. We use daily data from five Australia's regional electricity markets (Queensland, New South Wales, Victoria, South Australia and Tasmania). We find significant tail dependence between wholesale electricity prices indicating that especially extreme price observations like price spikes tend to occur jointly across these markets. Our results provide market participants with more timely suggestions for effective risk management and hedging strategies.
Author: Javier Contreras
Publisher: MDPI
ISBN: 3038424153
Category : Technology & Engineering
Languages : en
Pages : 259
Get Book Here
Book Description
This book is a printed edition of the Special Issue "Forecasting Models of Electricity Prices" that was published in Energies
Author: Álvaro Escribano
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
Get Book Here
Book Description
This paper analyses the evolution of electricity prices in deregulated markets. We present a general model that simultaneously takes into account the possibility of several factors: seasonality, mean reversion, GARCH behaviour and time-dependent jumps. The model is applied to equilibrium spot prices of electricity markets from Argentina, Australia (Victoria), New Zealand (Hayward), NordPool, and Spain using daily data. Six different nested models were estimated to compare the relative importance of each factor and their interactions. We obtained that electricity prices are mean-reverting with strong volatility (GARCH) and jumps of time-dependent intensity even after adjusting for seasonality. We also provide a detailed unit root analysis of electricity prices against mean reversion, in the presence of jumps and GARCH errors, and propose a new powerful procedure based on bootstrap techniques.
Author: Derek W. Bunn
Publisher: John Wiley & Sons
ISBN:
Category : Business & Economics
Languages : en
Pages : 368
Get Book Here
Book Description
Electricity markets are structurally different to other commodities, and the real-time dynamic balancing of the electricity network involves many external factors. Because of this, it is not a simple matter to transfer conventional models of financial time series analysis to wholesale electricity prices. The rationale for this compilation of chapters from international authors is, therefore, to provide econometric analysis of wholesale power markets around the world, to give greater understanding of their particular characteristics, and to assess the applicability of various methods of price modelling. Researchers and professionals in this sector will find the book an invaluable guide to the most important state-of-the-art modelling techniques which are converging to define the special approaches necessary for unravelling and forecasting the behaviour of electricity prices. It is a high-quality synthesis of the work of financial engineering, industrial economics and power systems analysis, as they relate to the behaviour of competitive electricity markets.
Author: Carl J. Ullrich
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
Get Book Here
Book Description
This paper uses high frequency wholesale electricity spot price data from Australia, Canada, and the United States to estimate realized volatility and the frequency of price spikes. I find similar levels of realized volatility in Australia and North America, with estimates ranging from 1,500% to 3,000%. I present evidence that nonparametric jump detection tests based the difference between realized variance and bipower variation are not reliable for electricity prices. Because daily electricity prices are average prices, fitting models to data sampled at the daily frequency can never lead to a quot;correctquot; specification for the underlying data generating mechanism.
