IDEAS home Printed from https://ideas.repec.org/p/hhs/cbsnow/2024_009.html
   My bibliography  Save this paper

Tail Risk Connectedness in the Australian National Electricity Markets: The Impact of Rare Events

Author

Listed:
  • Duy Pham, Son

    (University of Aberdeen Business School, Dunbar Street, Aberdeen, UK)

  • Do, Hung Xuan

    (School of Economics and Finance, Massey University, New Zealand)

  • Nepal, Rabindra

    (Faculty of Business and Law, School of Business, University of Wollongong, Australia)

  • Jamasb, Tooraj

    (Department of Economics, Copenhagen Business School)

Abstract

The tail risks can exhibit different and important features than average measures of risk in interconnected electricity markets. This paper examines the interconnectedness of tail risks within the regionally interconnected Australian National Electricity Market. We use the Conditional Autoregressive Value-at-Risk (CAViaR) and time-varying parameter vector autoregression (TVP-VAR) connectedness approach. Analysing historical data between 01 January 2006 and 04 February 2024. The results show significant levels of connectedness for both negative and positive tail risks, highlighting the dynamic and interdependent nature of these markets. Notably, we identify asymmetries in the transmission of tail risks and their key drivers, including oil market volatility and global geopolitical risks. Our findings show that some regions play a pivotal role in the risk dynamics across the regions of the network and the influence of energy source diversity on risk profiles. The study underscores the complexity of managing the expected increase in tail risks in interconnected electricity markets, emphasizing the need for adaptive, forward-thinking strategies tailored to evolving global and local conditions.

Suggested Citation

  • Duy Pham, Son & Do, Hung Xuan & Nepal, Rabindra & Jamasb, Tooraj, 2024. "Tail Risk Connectedness in the Australian National Electricity Markets: The Impact of Rare Events," Working Papers 9-2024, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2024_009
    as

    Download full text from publisher

    File URL: https://hdl.handle.net/10398/6b4ab065-3dc1-47d6-b921-1284a1a801c9
    File Function: Full text
    Download Restriction: Full text not avaiable
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Electricity markets; Tail risk; TVP-VAR connectedness; Australia; CAViaR;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:hhs:cbsnow:2024_009. 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: CBS Library Research Registration Team (email available below). General contact details of provider: https://edirc.repec.org/data/incbsdk.html .

    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.