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Title:A two-factor model for electricity prices with dynamic volatility PDF Logo
Authors:Schlüter, Stephan
Issue Date:2009
Series/Report no.:IWQW discussion paper series 04/2009
Abstract:The wavelet transform is used to identify a biannual and an annual seasonality in the Phelix Day Peak and to separate the long-term trend from its short-term motion. The short-term/long-term model for commodity prices of Schwartz & Smith (2000) is applied but generalised to account for weekly periodicities and time-varying volatility. Eventually we find a bivariate SARMA-CCC-GARCH model to fit best. Moreover it surpasses the goodness of fit of an univariate GARCH model, which shows that the additional effort of dealing with a two-factor model is worthwile.
Subjects:Wavelets
Seasonal Filter
Relative Wavelet Energy
Multivariate GARCH
Energy Price Modelling
JEL:C32
C51
Document Type:Working Paper
Appears in Collections:IWQW Discussion Paper Series, FAU Erlangen-Nürnberg

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