Chen, Shi Härdle, Wolfgang Karl López Cabrera, Brenda
Year of Publication:
IRTG 1792 Discussion Paper No. 2018-017
We investigate the concept of connectedness, which is important for risk measurement and management inGerman energy market. Understanding and learning from these mechanisms are essential to avoid future systemic disasters. To deal with large portfolio selection, we propose regularization approach to capture the spillover and contagion effects acrossGerman power derivatives. This paper shows how network analysis can facilitate the monitoring of futures price movements. Our methodology combines high-dimensional variable selection techniques with network analysis, the results show that contracts like Phelix Base Year Options and Phelix Peak Year Futures are in the core of the Energy futures market.
regularization energy risk transmission network German energy market