Abstract

Regime-switching models seem to well capture the main features of power prices behavior in deregulated markets. In a recent paper, we have proposed an equilibrium methodology to derive electricity prices dynamics from the interplay between supply and demand in a stochastic environment. In particular, assuming that the supply function is described by a power law where the exponent is a two-state strictly positive Markov process, we derived a regime switching dynamics of power prices in which regime switches are induced by transitions between Markov states. In this paper, we provide a dynamical model to describe the random behavior of power prices where the only non-Brownian component of the motion is endogenously introduced by Markov transitions in the exponent of the electricity supply curve. In this context, the stochastic process driving the switching mechanism becomes observable, andwewill show that the non-Brownian component of the dynamics induced by transitions from Markov states is responsible for jumps and spikes of very high magnitude. The empirical analysis performed on three Australian markets confirms that the proposed approach seems quite flexible and capable of incorporating the main features of power prices time-series, thus reproducing the first four moments of log-returns empirical distributions in a satisfactory way.

Autore Pugliese

• Canana' Lucianna

Tutti gli autori

• CANANA' L.

Titolo volume/Rivista

Non Disponibile

Anno di pubblicazione

2012

ISSN

0378-4371

ISBN

Non Disponibile

Numero di citazioni Wos

Nessuna citazione

Ultimo Aggiornamento Citazioni

Non Disponibile

Numero di citazioni Scopus

1

Ultimo Aggiornamento Citazioni

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Settori ERC

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Codici ASJC

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