A0621
Title: Impact of exogenous factors on tail risk measures in Australian electricity markets
Authors: Vincenzo Candila - University of Salerno (Italy) [presenting]
Antonio Naimoli - University of Salerno (Italy)
Abstract: Applying risk management strategies to financial markets is a common practice nowadays. Nonetheless, forecasting value-at-risk (VaR) and expected shortfall (ES) in the electricity markets is a relatively new area of research. The electricity markets have unique features like inelastic demand, price jumps, high volatility, strong intraday and daily seasonality, severe skewness and kurtosis, and negative prices. Moreover, the increasing electricity market liberalization has created incentives to realize active market risk management. In this context, the literature has not investigated the potential impact of low-frequency covariates, which could influence the daily VaR and ES measures. From this perspective, many price drivers, such as climate and economic policy uncertainty, could be considered. A large set of parametric, semi-parametric, and non-parametric models are used to forecast the VaR and ES of five Australian spot electricity markets, considering low- and high-frequency exogenous variables.
