Topic: Contributed on Bayesian econometrics Title: Electricity spot prices: A model based on stable CARMA processes and its Bayesian estimation Authors:  Gernot Mueller - Augsburg University (Germany) [presenting]
Armin Seibert - Augsburg University (Germany)
Abstract: In recent years, electricity markets throughout the world have undergone massive changes due to deregulations. Extreme price volatility has forced producers and wholesale consumers to hedge not only against volume risk but also against price movements. Consequently, statistical modelling and estimation of electricity prices are an important issue for the risk management of electricity markets. We consider a model for the electricity spot price dynamics, which is able to capture seasonality, low-frequency dynamics and the extreme spikes in the market. In particular, we model the large fluctuations by a non-Gaussian stable CARMA process. After looking at a first stepwise estimation procedure we develop a Bayesian approach to fit the model to data. Furthermore, we apply the procedures to base load and peak load data from the German electricity exchange EEX.