IDEAS home Printed from https://ideas.repec.org/a/rsk/journ2/2160785.html
   My bibliography  Save this article

Modeling electricity forward prices using the multivariate normal inverse Gaussian distribution

Author

Listed:
  • Arne Andresen, Steen Koekebakker, Sjur Westgaard

Abstract

ABSTRACT This paper presents a discrete random-field model for forward prices driven by the multivariate normal inverse Gaussian distribution. The model captures the idiosyncratic risk and adequately addresses the heavy tails characterizing electricity forward prices. We fit the model to forward prices from the Nordic power exchange using a Markov chain Monte Carlo algorithm. This is then compared with Gaussian-based multifactor models in terms of goodness of fit to historical log returns. Our finding is that the proposed model offers a superior fit to the empirical distributions.

Suggested Citation

Handle: RePEc:rsk:journ2:2160785
as

Download full text from publisher

File URL: https://www.risk.net/system/files/import/protected/digital_assets/4618/jem_v3n3a1.pdf
Download Restriction: no
---><---

More about this item

Statistics

Access and download statistics

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsk:journ2:2160785. See general information about how to correct material in RePEc.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

We have no bibliographic references for this item. You can help adding them by using this form .

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-energy-markets .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.