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Independent Spike Models: Estimation and Validation

Regland, Fredrik and Lindström, Erik LU (2012) In Finance a Úver 62(2). p.180-196
Abstract
We apply a class of Markov switching models (independent spike models) to six European electricity markets and two European gas markets. This paper extends the current framework by introducing Gamma distributed spikes, which improves the fit for most energy markets. The models are quite complex. The robustness of the estimates is therefore evaluated using three different estimation strategies: direct maximization of the likelihood function, the Expectation-Maximization algorithm, and Markov Chain Monte Carlo (MCMC). The seasonal variation is corrected for by using the month-ahead forward price as a predictor. The models provide good empirical results for most markets.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
regime switching models, electricity spot prices, independent spike, models, gamma distribution
in
Finance a Úver
volume
62
issue
2
pages
180 - 196
publisher
Charles University
external identifiers
  • wos:000303969200006
  • scopus:84862201518
ISSN
0015-1920
language
English
LU publication?
yes
id
d85b06b8-b336-4b1e-ae75-031ac71c5933 (old id 2826869)
alternative location
http://journal.fsv.cuni.cz/mag/article/show/id/1246
date added to LUP
2012-06-20 12:47:46
date last changed
2017-07-30 04:08:18
@article{d85b06b8-b336-4b1e-ae75-031ac71c5933,
  abstract     = {We apply a class of Markov switching models (independent spike models) to six European electricity markets and two European gas markets. This paper extends the current framework by introducing Gamma distributed spikes, which improves the fit for most energy markets. The models are quite complex. The robustness of the estimates is therefore evaluated using three different estimation strategies: direct maximization of the likelihood function, the Expectation-Maximization algorithm, and Markov Chain Monte Carlo (MCMC). The seasonal variation is corrected for by using the month-ahead forward price as a predictor. The models provide good empirical results for most markets.},
  author       = {Regland, Fredrik and Lindström, Erik},
  issn         = {0015-1920},
  keyword      = {regime switching models,electricity spot prices,independent spike,models,gamma distribution},
  language     = {eng},
  number       = {2},
  pages        = {180--196},
  publisher    = {Charles University},
  series       = {Finance a Úver},
  title        = {Independent Spike Models: Estimation and Validation},
  volume       = {62},
  year         = {2012},
}