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An Empirical Analysis of the Bid-ask Spread in the Continuous Intraday Trading of the German Power Market

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  • Clara Balardy

Abstract

Liquidity is decisive for a well-functioning market. As most of the literature on the subject is based on financial markets, the extrapolation of its insights to the power market is fragile. This paper shows the specificities of liquidity of the German power market. Using the bid-ask spread as a proxy, thanks to the detailed order book for the hourly contracts, I first describe the evolution of the liquidity over the trading session. The bid-ask spread has a "L-shaped" pattern over it. Second, I identify the four main drivers of the bid-ask spread: the volatility, the adjustments' need (forecast errors), the activity and the concentration of the market. I find that an increase of the volatility or the market concentration increases the bid-ask spread while an increase of the adjustments' need or the market activity decreases it.

Suggested Citation

  • Clara Balardy, 2022. "An Empirical Analysis of the Bid-ask Spread in the Continuous Intraday Trading of the German Power Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    • Handle: RePEc:aen:journl:ej43-3-balardy
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    Citations

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    Cited by:

    1. Thomas Deschatre & Xavier Warin, 2023. "A Common Shock Model for multidimensional electricity intraday price modelling with application to battery valuation," Papers 2307.16619, arXiv.org.
    2. Simon Hirsch & Florian Ziel, 2022. "Simulation-based Forecasting for Intraday Power Markets: Modelling Fundamental Drivers for Location, Shape and Scale of the Price Distribution," Papers 2211.13002, arXiv.org.
    3. Rainer Baule & Michael Naumann, 2022. "Flexible Short-Term Electricity Certificates—An Analysis of Trading Strategies on the Continuous Intraday Market," Energies, MDPI, vol. 15(17), pages 1-28, August.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

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