In this paper we address the issue of modeling spot electricity prices. After analyzing factors leading to the unobservable in other financial or commodity markets price dynamics we propose a mean reverting jump diffusion model. We fit the model to data from the Nord Pool power exchange and find...

For many economic problems standard statistical analysis, based on the notion of stationarity, is not adequate. These include modeling seasonal decisions of consumers, forecasting business cycles and - as we show in the present article - modeling wholesale power market prices. We apply standard...

Power-law tail behavior and the summation scheme of Levy-stable (alpha- stable) distributions is the basis for their frequent use as models when fat tails above a Gaussian distribution are observed. However, recent studies suggest that financial asset returns exhibit tail exponents well above...

In this paper we first analyze the stylized facts of electricity prices, in particular, the extreme volatility and price spikes which lead to heavy-tailed distributions of price changes. Then we calibrate Markov regime-switching (MRS) models with heavy-tailed components and show that they...

This empirical paper compares the accuracy of 12 time series methods for short-term (day-ahead) spot price forecasting in auction-type electricity markets. The methods considered include standard autoregression (AR) models, their extensions – spike preprocessed, threshold and semiparametric...

The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. Demand and supply are balanced on a knife-edge because electric power cannot be economically stored, end user demand is largely weather dependent, and the reliability of the grid...

The conditionally exponential decay (CED) model is used to explain the scaling laws observed in financial data. This approach enables us to identify the distributions of currency exchange rate or economic indices returns (changes) corresponding to the empirical scaling laws. This is illustrated...

We use the Conditionally Exponential Decay (CED) model to explain the scaling behavior in currency exchange (FX) rates. This approach enables us not only to show that FX returns satisfy scaling with an exponent qualitatively different from that of a random walk, but also to identify the...

In the paper Weron (1996, Statist. Probab. Lett. 28, 165-171), I gave a proof to the equality in law of a skewed stable variable and a nonlinear transformation of two independent uniform and exponential variables. The Chambers et al. (1976, J. Amer. Statist. Assoc. 71, 340–344) method of...