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Regime-switching characterization of electricity prices dynamics

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  • Mari, Carlo

Abstract

Stochastic models of electricity prices have been used extensively during the last few years to describe prices fluctuations in deregulated power markets. Regime-switching models seem good candidates to capture the main features of electricity prices dynamics as the mean-reversion property as well the presence of jumps and spikes. Since they offer the possibility to introduce various mean-reversion rates, volatility and jumps, depending on the state of the system, such models allow to describe the properties of the stable motion and of the spike dynamics in a very flexible way. In this paper, two-regime and three-regime models are discussed, and a comparison performed on market data, is proposed.

Suggested Citation

  • Mari, Carlo, 2006. "Regime-switching characterization of electricity prices dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 371(2), pages 552-564.
    • Handle: RePEc:eee:phsmap:v:371:y:2006:i:2:p:552-564
    DOI: 10.1016/j.physa.2006.03.040
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Angelica Gianfreda, 2010. "Volatility and Volume Effects in European Electricity Spot Markets," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 39(1‐2), pages 47-63, February.
    2. Mari, Carlo & Cananà, Lucianna, 2012. "Markov switching of the electricity supply curve and power prices dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1481-1488.
    3. De Sanctis, Angela & Mari, Carlo, 2007. "Modelling spikes in electricity markets using excitable dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 384(2), pages 457-467.
    4. Carlo Mari & Cristiano Baldassari, 2021. "Ensemble Methods for Jump-Diffusion Models of Power Prices," Energies, MDPI, vol. 14(8), pages 1-17, April.
    5. Dias, José G. & Ramos, Sofia B., 2014. "Energy price dynamics in the U.S. market. Insights from a heterogeneous multi-regime framework," Energy, Elsevier, vol. 68(C), pages 327-336.
    6. Mari, Carlo & Tondini, Daniela, 2010. "Regime switches induced by supply–demand equilibrium: a model for power-price dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4819-4827.
    7. Dias, José G. & Ramos, Sofia B., 2014. "Heterogeneous price dynamics in U.S. regional electricity markets," Energy Economics, Elsevier, vol. 46(C), pages 453-463.
    8. Carlo Mari & Emiliano Mari, 2021. "Gaussian clustering and jump-diffusion models of electricity prices: a deep learning analysis," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 1039-1062, December.
    9. Sapio, Alessandro, 2015. "The effects of renewables in space and time: A regime switching model of the Italian power price," Energy Policy, Elsevier, vol. 85(C), pages 487-499.

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