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.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/2826869
- author
- Regland, Fredrik
and Lindström, Erik
LU
- organization
- publishing date
- 2012
- 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
- 2016-04-01 13:49:53
- date last changed
- 2022-01-27 21:21:38
@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}},
keywords = {{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}},
url = {{http://journal.fsv.cuni.cz/mag/article/show/id/1246}},
volume = {{62}},
year = {{2012}},
}