Modeling of wind speed spatio-temporal series by multivariate-GARCH and copula/GARCH models

This paper discusses the application of five t-GARCH models to the problem of accurately modeling three univariate but mutually dependent wind speed series taken from three US metering sites distant few kilometers from each other. Besides a benchmark model consisting of three independent univariate t-GARCH models, a t-CCC, a t-DCC, a t-copula/t-CCC and a t-copula/t-DCC model will be estimated, studied in their unconditional (i.e. static) and conditional (i.e. fully dynamic) statistical features, and compared to each other and to some statistical features of the original series. In order to highlight the usefulness of choosing volatility-oriented modeling such as multivariate GARCH modeling for wind speed series, an Energy Finance application of capital budgeting under risk, i.e. energy portfolio selection, will be discussed and applied to the five modeling schemes.