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Regime-switching models for electricity spot prices: Introducing heteroskedastic base regime dynamics and shifted spike distributions

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2 Author(s)
Joanna Janczura ; Institute of Mathematics and Computer Science, Wroclaw University of Technology, 50-370, Poland ; Rafal Weron

We calibrate Markov regime-switching (MRS) models to mean daily spot prices from the EEX market. Our empirical study shows that (i) models with shifted spike regime distributions lead to more realistic models of electricity spot prices and that (ii) introducing heteroskedasticity in the base regime leads to better spike identification and goodness-of-fit than in MRS models with the standard mean-reverting, constant volatility dynamics.

Published in:

2009 6th International Conference on the European Energy Market

Date of Conference:

27-29 May 2009